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On declaration of a 2% stock dividend on 21,000 ordinary shares of $10 par (fair value $15), what amount is credited to Stock Dividends Distributable?
A$2,100
B$6,300
C$4,200
D$4,620
Answer & Solution
Correct answer: C. $4,200
1. Additional shares = $21{,}000 \times 2\% = 420$ shares.
2. Stock Dividends Distributable, like share capital, is recorded only at par value.
3. $420 \times \$10 = \$4{,}200$.
4. The $5-per-share premium ($2,100) goes to share premium, not to Distributable.
_Source: Jonick, Principles of Financial Accounting (CC BY-SA 4.0), §6.6 "Stock Dividends", p.255_
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