Question

Angie's just declared a 5 percent (small) stock dividend. Prior to the dividend, the stock had...

Angie's just declared a 5 percent (small) stock dividend. Prior to the dividend, the stock had a $1 par value per share, a $15 book value per share and a $15 market value per share. As a result of this dividend, the:

why the capital in excess of par value account will increase in value.

Homework Answers

Answer #1

The excess of par value account is also known as the additional capital stock or additional paid-in capital, with the par value being referred to as the paid-in capital or capital stock.

If the company issued stock dividends, it is akin to the issuance of new shares and an amount equal to the value of issued shares is deducted from the firm's retained earnings account and credited (added) to the firm's par value and capital excess in par value accounts, thereby raising both the account's value (and not just the capital in excess of par value account).

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