Question

The stockholders’ equity of TVX Company at the beginning of the day on February 5 follows:...

The stockholders’ equity of TVX Company at the beginning of the day on February 5 follows:

Common stock—$15 par value, 150,000 shares
authorized, 54,000 shares issued and outstanding

$

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.


February 5

February 28

Total market value of shares

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Answer #1

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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