Question

Problem 14-10 Stock Dividends [LO 3]

The company with the common equity accounts shown here has declared a 10 percent stock dividend at a time when the market value of its stock is $53 per share.

Common stock ($1 par value)	$	290,000
Capital surplus		1,345,000
Retained earnings		3,465,000
Total owners’ equity	$	5,100,000

Required:

Show the new equity account balances after the stock dividend distribution.

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

Answer 1

Stock dividend impact:

Additional Common stock value of stock dividend = 290000 x $1 x 10% = $29000

Additional Capital surplus = 29000 bonus share x (Issued value - Par value) = 29000 x ($53-$1) = $1,508,000

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Revised common stock, capital surplus and retained earnings:

Common stock revised = 290000 + 29000 = $319,000

Capita surplus = 1345000 + 1508000 = 2,853,000

Retained earnings = Pervious balance - additional common stock - additional capital surplus = 3465000 - 29000 - 1508000 = 1,928,000

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Particulars	Pervious	Revised
Common stock ($1 par value)	290,000	319,000
Capital surplus	1,345,000	2,853,000
Retained earnings	3,465,000	1,928,000
Total owners’ equity	5,100,000	5,100,000