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.
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...
See full answer below.
Become a member and unlock all Study Answers
Try it risk-free for 30 daysTry it risk-free
Ask a question
Our experts can answer your tough homework and study questions.Ask a question Ask a question
Learn more about this topic:
from GMAT Prep: Tutoring SolutionChapter 1 / Lesson 8