Problem 14-10 Stock Dividends [LO 3] The company with the common equity accounts
ID: 2656749 • Letter: P
Question
Problem 14-10 Stock Dividends [LO 3]
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 $53 per share.
Common stock ($1 par value)
$
290,000
Capital surplus
1,345,000
Retained earnings
3,465,000
Total owners’ equity
$
5,100,000
Required:
Show the new equity account balances after the stock dividend distribution.
Common stock
$
Capital surplus
Retained earnings
Total owners’ equity
$
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 $53 per share.
Explanation / Answer
Stock dividend impact:
Additional Common stock value of stock dividend = 290000 x $1 x 10% = $29000
Additional Capital surplus = 29000 bonus share x (Issued value - Par value) = 29000 x ($53-$1) = $1,508,000
----
Revised common stock, capital surplus and retained earnings:
Common stock revised = 290000 + 29000 = $319,000
Capita surplus = 1345000 + 1508000 = 2,853,000
Retained earnings = Pervious balance - additional common stock - additional capital surplus = 3465000 - 29000 - 1508000 = 1,928,000
--------------
Particulars
Pervious
Revised
Common stock ($1 par value)
290,000
319,000
Capital surplus
1,345,000
2,853,000
Retained earnings
3,465,000
1,928,000
Total owners’ equity
5,100,000
5,100,000
Particulars
Pervious
Revised
Common stock ($1 par value)
290,000
319,000
Capital surplus
1,345,000
2,853,000
Retained earnings
3,465,000
1,928,000
Total owners’ equity
5,100,000
5,100,000