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4. On August 1, 2018, CDD Corp., declared a 10% stock dividend on its common stock...

4. On August 1, 2018, CDD Corp., declared a 10% stock dividend on its common stock when the market value of the common stock was $25 per share. The balance in the common stock account, before the stock dividend was declared, was $850,000. The par value of all common stock is $10. What is the total dollar amount credited to additional paid in capital - common stock on August 1, 2018?

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Answer #1

Common stock = $850,000

Par value per share = $10

Existing outstanding number of common shares = Common stock / Par value per share

= 850,000/10

= 85,000

Stock dividend = 10%

Number of shares to be issued in the stock dividend = Existing outstanding number of common shares x Stock dividend

= 85,000 x 10%

= 8,500

Market value per share = $25

Amount credited to additional paid in capital - common stock on August 1, 2018 = Number of shares to be issued in the stock dividend x (Market value per share- Par value per share)

= 8,500 x (25-10)

= 8,500 x 15

= $127,500

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