Question

A corporation declared and issued a 15% stock dividend on October 1. The following information was available immediately prior to the dividend: Retained earnings $ 750,000 Shares issued and outstanding 60,000 Market value per share $ 15 Par value per share $ 5 The amount that paid-in capital will increase (decrease) as a result of recording this stock dividend is: Multiple Choice $45,000. $135,000. $(45,000). $(135,000). $0.

Answer 1

Answer:

The paid-in-capital will increase by $45,000

Explanation:

Shares issued and Outstanding = 60,000

Par Value = $5

Market Value = $15

Since, the 15% stock dividend is issued and the paid-in-capital will increase only by par value and the difference between market value and par value recorded in premium. The calculation will be:

⇒ 60,000 * 15% * 5

⇒ $45,000

The paid-in-capital will increase by $45,000.