Question

FYI: THIS IS A NEW SET OF PROBLEM WITH A NEW SET OF DATA.. PLEASE DO NOT PROVIDE OLD ANSWERS

The company with the common equity accounts shown here has declared a stock dividend of 15 percent at a time when the market value of its stock is $41 per share.

Common stock ($1 par value)	$	395,000
Capital surplus		848,000
Retained earnings		3,740,800
Total owners' equity	$	4,983,800

What would be the number of shares outstanding, after the distribution of the stock dividend? (Do not round intermediate calculations.)

New shares outstanding      ______________

What would the equity accounts be after the stock dividend? (Do not round intermediate calculations.)

Common stock	$
Capital surplus
Retained earnings
Total owners' equity	$

Answer 1

a). With a stock dividend, the shares outstanding will increase by one plus the dividend amount, so:

New shares outstanding = 395,000(1.15) = 454,250

b). New shares issued = 454,250 - 395,000 = 59,250

The capital surplus is the capital paid in excess of par value, which is $1, so:

Capital surplus for new shares = 59,250($41) = $2,429,250

The new capital surplus will be the old capital surplus plus the additional capital surplus for the new shares, so:

Capital surplus = $848,000 + $2,429,250 = $3,277,250

Particulars		Amount
Common Stock	454,250 x $1	$ 454,250
Capital Surplus		$3,277,250
Retained Earnings	$4,983,800 - $454,250 - $3,277,250	$1,252,300
Total Owners' Equity		$4,983,800