On January 1, Layline Corporation had 160,000 shares of $10 par value common stock outstanding. On June 17, the company declared a 15% stock dividend to stockholders of record on June 20. Market value of the stock was $15 on June 17. The stock was distributed on June 30. The entry to record the transaction of June 30 would include a Select one: a. credit to Paid-in Capital in Excess of Par for $120,000. b. credit to Common Stock for $360,000. c. debit to Common Stock Dividends Distributable for $240,000. d. debit to Common Stock for $240,000. e. debit to Stock Dividends for $360,000.

A. credit to Paid-in Capital in Excess of Par for $120,000.

E. debit to Stock Dividends for $360,000.

Explanation:

Irrespective of whether the company declared the stock dividend before or after the increase of market value of the stock, the stock dividend will be based on the market value of the common stock. The original journal entry to record the transaction is =

Debit   Stock Dividends      $360,000

Credit  Common Stock Dividends Distributable $240,000  

Credit  Paid in Capital in Excess of Par $120,000

Calculation = 160,000 shares of $10 par value = $1,600,000 × stock dividend = $1,600,000 × 15% = $240,000

Stock dividend = 160,000 shares of $15 market value = $2,400,000 × stock dividend = $2,400,000 × 15% = $360,000

Additional Paid in capital = $360,000 - 240,000 = $120,000

Therefore, option A and E are the answer.