The stockholders’ equity of TVX Company at the beginning of the
day on February 5 follows:
Common stock—$15 par value, 150,000 shares |
$ |
810,000 |
|
Paid-in capital in excess of par value, common stock |
525,000 |
||
Retained earnings |
675,000 |
||
Total stockholders’ equity |
$ |
2,010,000 |
|
On February 5, the directors declare a 10% stock dividend
distributable on February 28 to the February 15 stockholders of
record. The stock’s market value is $39 per share on February 5
before the stock dividend. The stock’s market value is $35 per
share on February 28.
Compute the total market value of the investor’s shares in part 2 as of February 5 and February 28.
|
Number of shares outstanding on Feb 5 = 54,000
Market value per share on Feb 5 = $39
Total market value of share on Feb 5 = Number of shares outstanding on Feb 5 x Market value per share on Feb 5
= 54,000 x 39
= $2,106,000
Stock dividend declared = 10%
Hence, number of shares to be issued in stock dividend = 54,000 x 10%
= 5,400
Total number of shares outstanding on Feb 28 = 54,000 + 5,400
= 59,400
Market value per share on Feb 28 = $35
Total market value of share on Feb 28 = Number of shares outstanding on Feb 28 x Market value per share on Feb 28
= 59,400 x 35
= $2,079,000
Feb 5 | Feb 28 | |
Total market value of shares | $2,106,000 | $2,079,000 |
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