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Stock Dividends and Splits - Small stock dividend- less than 20-25 percent of common shares outstanding - Transfer fair market value from retained earnings -
Stock Dividends and Splits - Small stock dividend- less than 20-25 percent of common shares outstanding - Transfer fair market value from retained earnings - Large stock dividend- more than 20-25 percent of common shares outstanding - Par value transferred from retained earnings to capital stock - Stock splits- Reduces the market value of shares - No entry - Decrease par value and increase number of shares Example: Koebele Corporation has outstanding 1,000 shares of $100 par value common stock and retained earnings of $50,000. If Koebele declares a 10 percent stock dividend, it issues 100 additional shares to current stockholders. If the fair value of the stock at the time of the stock dividend is $130 per share, the entry is: Example: Luna Steel, Inc. declared a 30 percent share dividend on November 20, payable December 29 to stockholders of record December 12. At the date of declaration, 1,000,000 shares, par value $10, are outstanding and with a fair value of $200 per share
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