Question

The stockholders’ equity section of Pretzer Corporation consists of common stock ($10 par) $2,650,000 and retained earnings $532,000. A 10% stock dividend (26,500 shares) is declared when the market price per share is $14. Show the before-and-after effects of the dividend on the following.
(a) The components of stockholders’ equity.(b) Shares outstanding.(c) Par value per share.

Answer 1

Answer:

A. $2,650,000 $3,312,500

B.$532,000 $291,500

C.$10 $10

Explanation:

Before Dividend After Dividend

(a)Stockholders’ equity

Paid-in capital

Common stock, $10 par

$2,650,000 $2,915,000

In excess of par value $106,000

Total paid-in capital

$2,650,000 $3,021,000

Retained earnings

$532,000 $291,500

Total stockholders’ equity

$3,182,000 $3,312,500

(b)Outstanding shares

$265,000 $291,500

(c)Par value per share

$10 $10

10×$26,500=$265,000

$2,650,000+$265,000=$2,915,000

$14×$26,500=$371,000-265,000

=$106,000

$265,000+$26,500=$291,500