# The company with the common equity accounts shown here has declared a 10 percent stock dividend...

## Question:

The company with the common equity accounts shown here has declared a 10 percent stock dividend at a time when the market value of its stock is $49 per share. Common stock ($1 par value) $560,000 Capital surplus 1,564,000 Retained earnings 3,896,000 Total owners' equity$ 6,020,000

Required: Show the new equity account balances after the stock dividend distribution.

## Stock dividend

A stock dividend is not a true dividend because it is not paid in cash. The effect of a stock dividend is to increase the number of shares that each owner holds. Because there are more shares outstanding, each is simply worth less.

## Answer and Explanation:

After the declaration, the outstanding shares increases by 10%.

• So, new shares outstanding = 560,000 ( 1.10 ) = 616,000
• New shares issued = ( 616,000...

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