Luke Enterprises has 300,000 shares of $20 par common stock outstanding. On January 19, Luke Enterprises declared a 3% stock dividend. The market price of the stock on January 19 was $28 per share.

The journal entry to record the stock dividend would include:

a) a debit to Stock Dividends Distributable for $252,000.

b) a debit to Cash for $252,000.

c) a credit to Stock Dividends for $180,000.

d) None of these choices are correct.

d) None of these choices are correct.

Explanation:

The journal entry is shown below:

Dividends $252,000 ($300,000 * $28 * 3%)

To Dividends Distributable A/c $180,000 ($300,000 * $20 * 3%)

To Paid-In Capital in Excess of Par A/c ($300,000 * $8 * 3%)

(Being the stock dividend is recorded)

We simply debited the dividend account and credited the dividend distributable account and paid in capital account so that correct posting can be done