Question

Black Raptor Inc. has retained earnings of $500,000 and total stockholders' equity of $2,000,000. It has 100,000 shares of $8 par value common stock outstanding, which is currently selling for $30 per share. What will occur if Black Raptor declares a 10% stock dividend on its common stock?

Answer 1

Answer:

The following things happens if Stock dividend is declares.

Retained Earnings will decrease by $300,000

Common Stock will increase by $80000

Paid in Capital in excess of Par will increase by $220000

Explanation:

The stock dividend has influence the position of equity section of the balance sheet. The retained earnings reduce while common stock and paid in capital in excess of par usually increase. The common stock issued at par while paid in capital in excess of par will increase due to market value of shares as it is difference between current total value of stock dividend minus common stock  issued by the company.