Answer:
Find below the pre stock dividend and post stock dividend effects.
Explanation:
Before the declaration of stock dividend the equity section of the balance sheet would look thus:
Common stock ($7 par) $959,000
Paid in capital in excess of par -
Total paid in capital $959,000
Retained earnings $410,000
Total shareholders' equity $1,369,000
However,upon declaration of the stock dividend which would be funded from retained earnings by reducing the retained earnings and increasing the common stock as well as paid in capital in excess of par.
Common stock ($7 par)($7*13,700)+$959,000 $1,054,900
Paid in capital in excess of par($18-$7)*13,700 $150,700
Total paid in capital $1,205,600
Retained earnings $410,000-($18*13,700) $163,400
Total shareholders' equity $ 1,369,000
