Question

The stockholders' equity sectlon of Jun Company's balance sheet as of April 1 follows. On April 2, Jun declares and distributes a 10% stock dividend. The stock's per share market value on April 2 Is $15 (prior to the diMdend). Conmon stock-$5 par value, 395,ee0 shares authorized, 218,ee0 shares issued and outstanding Paid-in capital in exceSS of par value, common stock Retained earnings 1.ese, ee 510,000 843,008 2,403,000 Total stockholders equity Prepare the stockholders' equity section Immediately after the stock dividend JUN COMPANY Stockholders' Equity April 2 (after stock dividend) Common stock Paid-in capital in excess of par value. common stock Total paid-in captal Retained earnings S 033 000 Total stocknoldars equity

Answer 1

Preparation of Statement of Stockholders' Equity : Working Note: Calculation of Balances after issue of Stock dividends: For issue of 10% stock dividend, we have to debit Retained Earnings with 10% of existing shares multiplying with Market Price of share. Retained Earnings reduced to that extent.And Credit Common stock at par value , difference shall be credited to Paid In Capital in excess of Par. So Amount to be debited to Retained Earnings = 210,000 x 10% x $15 = $315,000.00 Then , Common Stock balance incresed to extent of 210,000 shares x 10% x $5 Par Value = $105,000.00 The Paid in Capital in Excess of Par value, Common Stock increased by $315,000 - $105,000 = $210,000 Revised Figures will be Retained Earnings = $ Less: Stock Dividends $ Ending Balance = $ 843,000.00 (315,000.00) 528,000.00 Common Stock = $ Add: Stock Dividends $ Ending Balance = $ 1,050,000.00 105,000.00 1,155,000.00 Paid In Capital in Excess of Par, Common Stock = $ Add: Increased through Stock Dividend $ Ending Balance = $ 510,000.00 210,000.00 720,000.00

Statement of Stockholders' Equity: 1,155,000.00 Common Stock having $5 Par, 231,000 Shares issued and outstanding $ Paid In Capital in Excess of Par, Common Stock $ Total Paid In Capital Add: Retained Earnings Total Stockholders' Equity $ 720,000.00 1,875,000.00 528,000.00 2,403,000.00