Question

Use the following information to answer the next 10 questions:

A company with 100,000 authorized shares of $4 par common stock issued 50,000 shares at $9 per share, Subsequently, the company declared and issued 10% stock dividend. The market price of the shares is $20 per share.

What is the effect of the dividend on Retained Earnings?

Retained earnings decreased

Retained earnings increased

Retained earnings remained the same

None of the above.

Refer to the previous question. By what amount did Retained Earnings change, of at all? ( If the account balance or amount did not change, state your answer as “$0”)

By 5000 as dividend is 50000

What is the effect of the dividend on Common Stock?

Common stock decreased

Common stock increased

Common stock remained the same

None of the above

Refer to the previous question. By what amount did Common Stock change, of at all? (If the account balance or amount did not change, state your answer as “$0”)

What is the effect of the dividend on Paid-in- Capital?

Paid-in Capital decreased

Paid-in Capital increased

Paid-in Capital remained the same

None of the above

Refer to the previous question. By what amount did Paid-in Capital change, of at all? (If the account balance or amount did not change, state your answer as “$0”)

What is the effect of the dividend on the number of shares outstanding?

The number decreased

The number increased

The number remained the same

None of the above

Refer to the previous question. By what amount did the number of shares outstanding change, if at all? (If the account balance or amount did not change, state your answer as “$0”) $0 – No change

What is the effect of the dividend on total equity and total assets?

Total equity decreased, and total assets decreased

Total equity decreased, and total assets increased

Total equity increased, and total assets decreased

Total equity increased, and total assets increased

None of the above

Refer to the previous question. By what amount did total equity and total assets change if at all? (If the account balance or amount did not change, state your answer as “$0”)

Answer 1

The effect of the dividend on Retained Earnings = Retained Earnings Decreased

The amount by which Retained Earning Change = (50000 shares * 10%) * $ 20 = $100000

The effect of the dividend on Common Stock = Increase Common Stock

Common Stock Change = (50000 shares * 10%) * $ 4 = $20000

The effect of the dividend on Paid-in- Capital = Increase Paid in Capital

Amount by Paid in Capital Change = (50000 shares * 10%) * $ 16 = $80000

effect of the dividend on the number of shares outstanding = Increase’

Increase in Shares outstanding by = 50000 * 10% = 5000 shares