Question

Marigold Corp. has 493000 shares of $10 par value common stock outstanding. During the year Marigold declared a 14% stock dividend when the market price of the stock was $36 per share. Three months later Marigold declared a $0.60 per share cash dividend. As a result of the dividends declared during the year, retained earnings decreased by

Answer 1

Answer: $2,821,932

Explanation:

No. of shares outstanding before stock dividend = 493,000

Price per share = $36

Stock dividend issued (shares issued) = 493,000 x 14% = 69,020

Value of stocks issued as stock dividend = 69,020 x $36 = $2,484,720

No. of shares outstanding after stock dividend = 493,000 +69,020 = 562,020

Cash dividend = 562,020 x 0.60 = 337,212

Total reduction in retained earnings = total value of dividend issued

= $2,484,720+$337,212

= $2,821,932