Question

QS 11-7 Accounting for small stock dividend LO P2

The stockholders’ equity section of Jun Company’s balance sheet as of April 1 follows. On April 2, Jun declares and distributes a 10% stock dividend. The stock’s per share market value on April 2 is $20 (prior to the dividend).

Common stock—$5 par value, 375,000 shares
authorized, 200,000 shares issued and outstanding	$	1,000,000
Paid-in capital in excess of par value, common stock		600,000
Retained earnings		833,000
Total stockholders' equity	$	2,433,000

  
Prepare the stockholders’ equity section immediately after the stock dividen

JUN COMPANY
Stockholders' Equity
April 2 (after stock dividend)
Total paid-in capital	0
Total stockholders' equity	$0

Answer 1

• Stock dividend no of shares issued = 200000 shares x 10% = 20,000
• Stock dividend amount = 20000 shares x $ 20 market price = $ 400,000
• Common Stock account increased by = 20000 shares x $ 5 par = $ 100,000
• Requirement asked

JUN COMPANY
Stockholders' Equity
April 2 (after stock dividend)
Common Stock [(200000+20000) shares x $ 5 par]	$1,100,000
Paid in Capital in excess of Par Value - Common Stock ($600000 + 300000)	$900,000
Total paid-in capital	$2,000,000
Retained earnings ($833000 – 400000 stock dividend)	$433,000
Total stockholders' equity	$2,433,000