Question

The stockholders' equity section of Jun Company's balance sheet as of April I follows. On April 2... declares and distributes a 10% stock dividend. The stock's per share market value on April 2 is $20 (price to the dividend). Prepare the stockholders' equity section immediately after the stock dividend. Common stock-$5 par value, 375,000 shares authorized, 200,000 shares issued and outstanding ............. Paid-in capital in excess of par value, common stock Retained earnings .......... Total stockholders' equity ........ $1,000,000 600,000 833,000 $2,433,000

Answer 1

Solution: Stockholders' equity section after the stock dividend:

STOCKHOLDERS' EQUITY $ Common stock-$5 par value, 375,000 shares authorized, 220,000 shares issued and outstanding Paid-in capital in excess of par value, common stock Retained earnings Total stocholders' equity 1,100,000 900,000 433,000 2,433,000 $

Workings:

Common stock after issuance of stock dividend = $1,000,000 + 200,000*10%×$5 = $1,100,000

paid-in capital in excess of par value, common stock = $600,000 + 200,000×10%×($20-$5) =$900,000

Retained earnings = $833,000 - 200,000×10%×$20 = $433,000

Note: If you have any query, ask me in the comment section. Give vote ups (ratings) please !!!