Question

Sheldon, Inc. declared a stock dividend of​ 50,000 shares on a date when the​ company's common stock was selling for $ 18 per share. Prior to this​ date, Sheldon had​ 500,000 outstanding shares of $ 1 par value common stock. As a result of this stock​ dividend, Sheldon's common stock will​ ________, the additional paidminusin capital will​ ________, and the retained earnings will​ ________.

Answer 1

Answer:

As a result of this stock​ dividend, Sheldon's common stock will​ increase by $900,000, the additional paid  in capital will​ not change, and the retained earnings will​ decrease by $900,000

Explanation:

Stock dividend is paying dividends by issuing additional stocks to shareholders.

In this case,50,000 shares were issued instead of paying cash dividends.

The stock dividend is financed from retained earnings and the amount involved is $900,000(50000*$18).

However,common stock would witness an increase of $900,000 by a way of credit and retained earnings would reduce by the same amount with no impact in the paid in capital in excess of par since the par value of the stock was not provided,hence it is no par value stock.