Question

On January 1, Edmiston Corporation had 1,600,000 shares of $10 par value common stock outstanding. On March 31 the company declared a 10% stock dividend. Market value of the stock was $15/share. As a result of this event,a. Edmiston's Paid-in Capital in Excess of Par Value account increased $800,000.b. Edmiston's total stockholders' equity was unaffected.c. Edmiston's Stock Dividends account increased $2,400,000.d. All of these answer choices are correct.

Answer 1

Answer:

option D is correct.

Explanation:

The entry to record stock dividend is:    

                                         Debit      

Stock Dividends        2400000      [$= 1600000\times 0.10\times 15$]

                                        Credit

Stock Dividends  Distributable         1600000       [$= 1600000\times 0.10 \times 10$]

Paid in capital in excess of par = 2400000 - 1600000 = 800000  

Stock dividends will not affect the total equity of the stockholder

Therefore option D is correct.