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A corporation declares a 2% stock dividend on 21,000 ordinary shares of $10 par value when fair market value is $15 per share. What amount is debited to the stock dividends account?
A$2,100
B$4,200
C$6,300
D$3,150
Answer & Solution
Correct answer: C. $6,300
1. Additional shares = $21{,}000 \times 2\% = 420$ shares.
2. A stock dividend is valued at fair market value: $420 \times \$15 = \$6{,}300$.
3. (Par portion $4,200 and premium $2,100 are the credits, not the total debit.)
4. Stock dividends is debited for the full $6,300.
_Source: Jonick, Principles of Financial Accounting (CC BY-SA 4.0), §6.6 "Stock Dividends", p.255_
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