Question

# The stockholders' equity section of the December 31, 2009, balance sheet for Interiors, Inc. before its...

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

#### Homework Answers

Answer #1

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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