Answer:
a. Compute the par value per share (1) before the stock dividend and (2) after the stock dividend.
- 1) $7 per stock
- 2) $7 per stock
b. Indicate the balances in the three stockholders? equity accounts after the stock dividend shares have been distributed.
- Common stock $589,050
- Paid-in capital in excess of par - common stock $83,550
- Retained earnings $625,400
Explanation:
since it is a "small" stock dividend, it will be carried out at market value and not at par value.
the total number of stocks = $535,500 / $7 par value = 76,500 stocks
total transaction = 76,500 stocks x $14 x 10% = $107,100
the journal entry should be:
Dr Retained earnings 107,000
Cr Common stock 53,550
Cr Paid in capital in excess of par value 53,550
total common stock account = $535,500 + $53,550 = $589,050 / 84,150 stocks = $7 per stock
