Answer:
C) None of these choices are correct.
The journal entry should be:
Dr Retained earnings 252,000
Cr Common stock 180,000
Cr Paid in capital in excess of par value 72,000
Explanation:
since the corporation has 300,000 outstanding stocks, they will distribute 300,000 x 3% = 9,000 new common stocks
Since the number of stocks issued are less than 20%, the dividends must be recorded at market value:
9,000 stocks x $28 = $252,000
common stock account = 9,000 x $20 = $180,000
paid in capital in excess of par value = $252,000 - $180,000 = $72,000
The journal entry should be:
Dr Retained earnings 252,000 (dividends always reduce retained earnings)
Cr Common stock 180,000 (new stocks are issued)
Cr Paid in capital in excess of par value 72,000
