Question

The stockholders' equity section of Jun Co.'s balance sheet as of April 1 follows. On April 2, Jun declares and distributes a 20% stock dividend. The stock's per share market value on April 2 is $15 (prior to the dividend). Common stock-55 par value415,000 shares authorised, 220,000 shares osed and outstanding Tald.in capital in excess of par value, c on stock Retained earnings Total stockholders' equity $1.100.000 530.000 053,000 $2.40.000 mo Prepare the stockholders' equity section Immediately after the stock dividend is distributed JUN CO Stockholders' Equity April 2 (after stock dividend) Sin catin excess of para common stock Told in capital 1320 000 To w holdersequity

Answer 1

JUNCO. Stockholders' Equity April 2 (after stock dividend) Common stock Paid-in capital in excess of par value, common stock Total paid-in capital Retained earnings Total stockholders' equity $ $ $ $ $ 1,320,000 970,000 2,290,000 193,000 2,483,000

Number of shares outstanding = 220,000

Number of shares issued as dividend = 20% * Number of shares outstanding
Number of shares issued as dividend = 20% * 220,000
Number of shares issued as dividend = 44,000

Increase in common stock = Number of shares issued as dividend * Par value per share
Increase in common stock = 44,000 * $5.00
Increase in common stock = $220,000

Decrease in retained earnings = Number of shares issued as dividend * Market price per share
Decrease in retained earnings = 44,000 * $15.00
Decrease in retained earnings = $660,000

Increase in paid-in capital = Decrease in retained earnings - Increase in common stock
Increase in paid-in capital = $660,000 - $220,000
Increase in paid-in capital = $440,000