Question

Randall's has 28,000 shares of stock outstanding with a par value of $1 per share. The market value is $13 per share. The balance sheet shows $152,000 in the capital in excess of par account, $34,000 in the common stock account, and $92,800 in the retained earnings account. The firm just announced a 15 percent (small) stock dividend. What will be the balance in the retained earnings account after the dividend

Answer 1

Answer: $38,200

Explanation:

There are 28,000 Outstanding shares with a $13 market value.

That means that in total they are valued at,

= 28,000 * 13

= $364,000

The firm announced a 15% dividend so we take 15% of the total amount.

= 15% * 364,000

= $54,600

$54,600 is the total amount they will pay as dividends.

Dividends are taken from the Retained Earnings meaning that the balance in Retained earnings is therefore,

= $92,800 - $54,600

= $38,200

$38,200 will be the balance in the retained earnings account after the dividend.