Question

The stockholders' equity section of the balance sheet for Potawatomi Corporation appeared as follows before its recent stock dividend: Common stock, $10 par, 10,000 shares issued and outstanding $ 100,000 Additional paid-in capital - common 120,000 Retained earnings 150,000 Total stockholders' equity $ 370,000 Potawatomi declared a 10% stock dividend (considered small) when the market price per share was $20. After the stock dividend was distributed, the components of the stockholders' equity section were: Common Stock Additional Paid-in Capital Retained Earnings [A] [B] [C]

Answer 1

Answer:

Common stock = $110,000

Additional paid-in capital  = $130,000

Retained earnings = $170,000

Explanation:

Computation of the given data are as follows:

Common stock after issuing stock dividend = $100,000 + ( 10,000 ×10% × $10)

= $100,000 + 10,000 = $110,000

Additional paid-in capital after issuing stock dividend = 120,000 +  ( 10,000 ×10% × $10)

= 120,000 + 10,000 = $130,000

Retained earnings after issuing stock dividend = 150,000 +  ( 10,000 ×10% × $20)

= 150,000 + 20,000 = $170,000