Question

A company with 110,000 authorized shares of $8 par common stock issued 49,000 shares at $13. Subsequently, the company declared a 2% stock dividend on a date when the market price was $30 per share. What is the amount transferred from the retained earnings account to paid-in capital accounts as a result of the stock dividend?

Answer 1

Answer:

$29,400

Explanation:

The company will distribute dividends only to outstanding shares, since the number of outstanding shares is not specified, we should assume that all the 49,000 shares issued are outstanding shares. The company declared a 2% dividend, so we must multiply the current value of the stock times 2% = $30 x 2% = $0.60 per share.

The total amount distributed was 49,000 outstanding shares x $0.60 per share = $29,400