Question

Exercise 14-05 a-b (Part Level Submission) (Video) 

On October 1, Oullumber Corporation's stockholders' equity is as follows. 

Common stock, $5 par value $381,500

Paid-in capital in excess of par-common stock 28,000

Retained earnings 165,000

Total stockholders' equity  $574,500 

On October 1, Cullumber declares and distributes a 10% stock dividend when the market price of the stock is $14 per share. 

(a) Your answer is correct. Compute the par value per share (1) before the stock dividend and (2) after the stock dividend. 

(b) Indicate the balances in the three stockholders' equity accounts after the stock dividend shares have been distributed. 

Common stock = _______ 

Paid-in capital in excess of par value = _______ 

Retained earnings = _______ 

Answer 1

Total stock issue = ($381,500 / $5) X 10% X $14 = $106,820

Common stock = ($381,500 / $5) X 10% X $5 = $38,150

Paid in capital in excess of par - Common stock = ($381,500 / $5) X 10% X ($14 - $5) = $68,670

Common stock = $381,500 + $38,150 = $419,650

Paid in capital in excess of par - Common stock = $28,000 + $68,670 = $96,670

Retained earnings = $165,000 - $106,820 = $58,180