The company with the common equity accounts shown here has declared a 10 percent
ID: 1171892 • Letter: T
Question
The company with the common equity accounts shown here has declared a 10 percent stock dividend when the market value of its stock is $32 per share.
What would be the number of shares outstanding, after the distribution of the stock dividend? (Do not round intermediate calculations.)
What would the equity accounts be after the stock dividend? (Do not round intermediate calculations.)
The company with the common equity accounts shown here has declared a 10 percent stock dividend when the market value of its stock is $32 per share.
Explanation / Answer
a) Number of shares outstanding= 451,000 shares.
The number of shares outstanding, after the distribution of the stock dividend
=Existing common stock +Number of common stock issued on stock dividend
Where ,
Existing number of common stock = Common capital /Par value
= $410,000/$1 = 410,000 shares
Number of stock dividend= 410,000*10% = 41,000 shares.
Hence the total number of shares outstanding after distribution = 410,000+41,000= 451,000 shares.
b) Equity account after stock dividend
Common stock ($1 par value)
$451,000
Capital surplus
(851,000+$1,271,000)
$2,122,000
Retained earnings $
(3,770,800-41000*32)
$2,458,800
Total owner's equity
$5,031,800
Note:- When the stock dividend is issued the following entry will be passed.
Retained earnings Dr- 1,312,000
(41,000*32)
To common stock $41,000
(41,000*$1)
To capital surplus $1,271,000
Please feel free to ask if you have any query the comment section.
Common stock ($1 par value)
$451,000
Capital surplus
(851,000+$1,271,000)
$2,122,000
Retained earnings $
(3,770,800-41000*32)
$2,458,800
Total owner's equity
$5,031,800