Question

on July 1, James Corporation gas 1090000 shares of $10 par value common stock outstanding. on September 30. the company declared a 15 % stock dividend. market value of the stock was 16$/share. as a result of this event.

A. James paid in capital excess of par account increased 981000

b. James total stockholders equity was unaffected

c. James stock dividend account increased 2616000

d. all are correct

Answer 1

The answer is b. James Total stockholders equity is unaffected.

In the above question there is only declaration of divided and change in market price. There is no mention of issue of equity shares at par or above par, hence the question of "capital excess of par account" does not come into picture. Hence it cannnot be option a.

Further, dividend is always calculated on the face value of the share. Hence, the market price does impact the dividend calculation. Hence, it cannot be option c.

Declaration of dividend and change in market price does not impact stock holders equity - hence answer is b.