The stockholders' equity section of the December 31, 2009, balance sheet for Interiors, Inc. before its recent stock dividend was as follows:Common Stock, $5 par, 100,000 shares issued and outstanding$ 500,000Paid-in Capital in Excess of Par--CommonStock100,000Retained Earnings725,000Total Stockholders' Equity$1,325,000Interiors declared a 10% stock dividend when the market price per share was $8.00. After the stock dividend, the components of Interior's stockholders' equity section were: Common Stock Paid-in Capital Retained Earningsa.$580,000 $100,000 $645,000b.$550,000 $100,000 $805,000c.$550,000 $130,000 $645,000d.$580,000 $130,000 $805,000
Answer is Option – C (Common stock $550000, Paid-in capital in excess of par $130000, Retained earnings $645000)
Explanation;
Outstanding shares = 100000
10% stock dividend (100000 * 0.10) = 10000 shares
Current market price is given = $8
Par value of stock is given = $5
Hence balances of stockholders’ equity section after stock dividend will be as follow;
Common stock $500000 + (10000 * $5) |
$550000 |
Paid-in capital in excess of par $100000 + (10000 * $3) |
$130000 |
Retained earnings ($725000 – $80000) |
$645000 |
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