Question

on December 31 the stockholders equity section of the

20. 0.50 points On December 31, the stockholders' equity section of the balance sheet of R&B Corporation reflected the following Common stock (par $10 authorized 61,300 shares outstanding 26,300 shares) Additional paid-in capital Retained earnings $263.000 13.300 81,500 On February 1 of the following year a 12 percent stock dividend was issued. The market value of the stock on February 1 was $18 per share Required: 1. For comparative purposes, prepare the stockholders equity section of the balance sheet (a) immediately before the stock dividend and (b) immediately after the stock dividend. Stockholders' Equity Before Stock After Stock Stock Dividend Dividend Dividend Contributed Capital / ZX Total Contributed Capital / / THA / Total Stockholders' Equity al change 2. If the stock dividend were 100%, would the balance in additional paid-in capital change? Yos No

Answer 1

1.

	Stockholders' equity
	Before stock dividend	stock dividend	After stock dividend
Contributed capital:
Common stock	263,000	31,560	294,560
Additional paid in capital	13,300	25,248	38,548
Total Contributed capital	276,300	56,808
Retained earnings	81,500	- 56,808	24,692
Total Stockholders' equity	$357,800	$357,800	$357,800

Number of shares outstanding = 26,300

Current market value of 1 common stock = $18

Stock dividend declared = 12%

Hence, number of shares to be issued = 26,300 x 12%

= 3,156

Hence, amount to be debited to retained earnings = Number of shares to be issued x Current market value of 1 common stock

= 3,156 x 18

= $56,808

Amount to be credited to common stock = Number of shares to be issued x Par value per share

= 3,156 x 10

= $31,560

Amount to be credited to Additional Paid in capital, in excess of par - common stock = Number of shares to be issued x (market value of 1 common stock - Par value per share)

= 3,156 x (18 - 10)

= $25,248

2.

Balance in Additional Paid in capital would not change if stock dividend is 100%

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