Question
In: Finance
The owner's equity accounts for XYZ company are shown here: Common stock ($1 per value) $50,000...
The owner's equity accounts for XYZ company are shown here: Common stock ($1 per value) $50,000 Capital surplus 345,000 Retained earnings 750,000 Total owner’s equity $1,145,000 If XYZ stock currently sells for $25 per share and a 15% stock dividend is declared, what is the amount of the retained earnings on the equity accounts after stock dividend.
Group of answer choices $308,900 $525,000 $562,500 $582,500 None of above is correct.
Solutions
Expert Solution
| Given, | |||||||||
| Common stock ($1 per value) | $50,000 | ||||||||
| Capital surplus | $345,000 | ||||||||
| Retained earnings | $750,000 | ||||||||
| Market price | $25 | ||||||||
| Stock dividend | 15% | ||||||||
| Number of shares outstanding= Common stock/Par value per share | |||||||||
| 50000/1 | |||||||||
| 50000 | |||||||||
| As the rate of dividend is 15% the same would be regarded as small stock dividend and would be accounted for at market price | |||||||||
| Journal entry: | |||||||||
| Debit ($) | Credit ($) | Workings | |||||||
| Retained earnings | 187500 | (50000 shares*15% stock dividend*$25 per share) | |||||||
| Common stock | 7500 | (50000*$1*15%) | |||||||
| Paid in capital in excess of par | 180000 | (50000*($25-$1)*15%) | |||||||
| Therefore, | |||||||||
| Amount of retained earnings after stock dividend= $(750000-187500) | |||||||||
| $562,500 | |||||||||
| Answer: Option C | |||||||||
jeff jeffy answered 1 year agoRelated Solutions
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