Question

Exercise 14-05 a-b (Part Level Submission) (Video) On October 1, Blossom Corporation's stockholders' equity is as follaws. Common stock, $5 par value Paid-in capital in excess of par-common stock Retained earnings $375,000 20,000 152,000 $547,000 Total stockholders' equity On Otter 1. Blossom declares and distrbutes a 10% stock dividend when the market price of the stock is $14 per share. ▼(a) Your answer is incorrect. Try again. Compute the par value per share (1) before the stock dividend and (2) after the stock dividend. Par value before the stock dividend Par value after the stock dividend VIDEO: SIMILAR EXERCISE LENK TO TEXT Attempts: 1 of 3 used sAve POR LATER SUBMET ANSWER The parts of this question must be compleced in order. This part will be available when you complete the part above

Answer 1

Par Value of the Stock is the stated value per share which appear on the share certificate.

Stock Dividend is the distribution of additional shares to each shareholder in an amount proportional to their current number of shares. There is no impact on the par value of the share as well as the total shareholders equity. When the Stock dividend is issued, "Retained Earnings' are debited based on the market values of the shares, "Common Stock" is credited by the par value of shares and amount above the par value is credited to "Paid-in-Capital in excess of Par value of Common stock"

Market Value Common Stock $ par value No of Shares [$375000/$5] $14 $375,000 75000 Stock Dividend Stock Dividend in Shares [75000 x10%) 10% 7500 Journal Entry Particulars Retained Earnings Common Stock Paid in Capital in excess of Par Common Stock (To record stock dividend issued) DebitCreditComputation 17500 x $14] $37,500 [7500 x $5] $67,500 [7500 x $9] $105,000 Ans 1 Par Value per share Before the Stock Dividend Ans 2 Par Value per share After the Stock Dividend $5 $5 From the above discussion it can be observed that there will not be any change in par value of the common stock after the stock dividend