Answer:
The dollar amount credited to common stock is $40,000
The dollar amount credited to additional paid in capital - common stock is $36,000
Explanation:
Before stock dividend is declared, there is 80,000 stocks outstanding ( that is, Common stock account balance/par value per stock = 800,000/10)
=> Stock to be distributed as dividend = 80,000 * 5% = 4,000 stocks
As the stock dividend is 5%, this is a small stock dividend => stock dividend is to be recorded at market value.
We have the entries:
Dr Retained Earnings 76,000
Cr Common stock dividend distributable 40,000
Cr Additional paid-in capital - common stock 36,000
So:
The dollar amount credited to common stock is $40,000
The dollar amount credited to additional paid in capital - common stock is $36,000
