Question

On October 1, Oriole Corporation’s stockholders’ equity is as follows.

Answer 1

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