Question

Beacon Corporation issued a 7 percent stock dividend on 27,500 shares of its $7 par common...

Beacon Corporation issued a 7 percent stock dividend on 27,500 shares of its $7 par common stock. At the time of the dividend, the market value of the stock was $30 per share. Required a. Compute the amount of the stock dividend.

Stock dividend

Show the effects of the stock dividend on the financial statements using a horizontal statements model. In the Cash Flow column, indicate whether the item is an operating activity (OA), investing activity (IA), or financing activity (FA). Use NA to indicate that an element was not affected by the event. (Amounts to be deducted should be indicated with a minus sign.)
  

Balance Sheet Income Statement
Assets = Liabilities + Stockholders’ Equity Revenue – Expense = Net Income Cash Flow
Cash = + Common Stock + PIC in Excess + Retained Earnings – =
= + + + – =
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Answer #1

The impact of stock dividend on horizontal financial statement is given below

Stock dividend are declared from retained earnings and thus the amount of stock dividend would be reduced from retained earnings

Retained earnings = 27,500*7%*30 = 57,750

Common stock = 27,500*7%*7=$13,475

PIC in excess = 27,500*7%*(30-7) = $44,275

Retained earnings would decrease by $57,750 while common stock and PIC in excess would increase by $13,475 and $44,275 respectively.

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