On October 31, 2017, Lexington Corp. declared and issued a 12% common stock dividend. Prior to...

On October 31, 2017, Lexington Corp. declared and issued a 12% common stock dividend. Prior to this dividend, Lexington had 302,000 shares of $0.001 par value common stock issued and outstanding. The fair value of Lexington's common stock was $16.75 per share on October 31, 2017. As a result of this stock dividend, the company's total stockholders' equity please explain in details

Expert Solution

--As a results of this stock dividend, the company's total Stockholder's Equity will REMAIN THE SAME and UNAFFECTED.

--This is because even though the paid up capital gets increased by the amount of Stock Dividend, the Retained earnings [also part of stockholder's equity] will get decreased by the same amount.

A	Current no. of shares	$302,000
B	Stock Dividend rate	12%
C = A x B	No. of shares distributable as stock dividend	36,240
D	fair Value of Stock	$ 16.75
E = C x D	Total Stock Dividend	$607,020

A	Increase in Paid up Capital	$607,020
B	Decrease in Retained earnings	$607,020
C = A - B	Net Increase (Decrease) in Stockholder's Equity	$0

ekkarill92 answered 2 months ago

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