Entry is as follows if common shares have par value

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amount to be debited to the stock dividends account is $75,000 (5000x15). Entry is as follows: If common shares have par value of $10 per share, the account Stock Dividends would be debited for the fair market value of the shares issued (5000 x $15). Common Stock Dividends Distributable would be credited for the par value of the dividend shares (5000 x 10). The excess over stated value (5000 x $5) would be credited to an additional contributed capital account. Common Stock Dividends Distributable is a shareholders’ equity account. It is not a liability because assets will not be used to pay the dividend. If a balance sheet is prepared before the dividend shares are issued, the distributable account is reported under share capital as an addition to common shares issued.
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Effects of Stock Dividends Stock dividends change the composition of shareholders’ equity because a portion of retained earnings is transferred to share capital but total shareholders’ equity remains the same. Stock dividends also have no effect on legal capital per share. But the number of shares issued increases while book value per share decreases Stock Splits A stock split is the issue of additional shares to shareholders according to their percentage ownership. Purpose of stock split is to increase marketability by lowering market values of each share. A lower market value also increases investor interest and makes it easier to issue additional shares. Sometimes, due to increased investor interest, share prices rise above intended split value.
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