On January 1, Sheridan Corporation had 740000 shares of $10 par value common stock outstanding. On March 31, the company declared a 15% stock dividend. Market value of the stock was $20/share. As a result of this event:
a. Sheridan Paid-in Capital in Excess of Par account increased $1110000
b. Sheridan total stockholders' equity was unaffected.
c. Sheridan Stock Dividends account increased by $2220000.
d. All of these answers are correct.

d. All of these answers are correct.

Explanation:

The journal entry is as follows

Stock dividends   $2,220,000  (740,000 shares × $20 × 15%)

       To Stock Dividend distributable  $1,110,000  (740,000 shares × $10 × 15%)

       Paid-in Capital in Excess of Par   $1,110,000

(Being the dividend is recorded)

While recording this transaction we debited the stock dividend and credited the stock dividend distributable and paid in capital in excess of par so that the correct posting could arrive

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