Question
In: Accounting
On June 30, Sharper Corporation’s stockholders' equity section of its balance sheet appears as follows before...
On June 30, Sharper Corporation’s stockholders' equity section of its balance sheet appears as follows before any stock dividend or split. Sharper declares and immediately distributes a 50% stock dividend.
| Common stock—$10 par value, 120,000 shares authorized, 90,000 shares issued and outstanding | $ | 900,000 | |
| Paid-in capital in excess of par value, common stock | 400,000 | ||
| Retained earnings | 760,000 | ||
| Total stockholders’ equity | $ | 2,060,000 |
(1) Prepare the updated stockholders' equity section after the
distribution is made.
(2) Compute the number of shares outstanding after the distribution
is made.
Solutions
Expert Solution
1.
In case of large stock dividends, usually above 25%-30%, value assigned to dividend is the par value of share.
Number of common shares outstanding = 90,000
Stock dividend = 50%
Number of shares to be issued = 90,000 x 50%
= 45,000
Retained earnings will be debited by $450,000 ( 45,000 x 10) and common stock will be credited by $450,000.
Common stock after stock dividend = 900,000+450,000
= $1,350,000
Retained earnings after stock = 760,000-450,000
= $310,000
| Common stock—$10 par value, 135,000 shares authorized, 135,000 shares issued and outstanding | $ | 1,350,000 | |
| Paid-in capital in excess of par value, common stock | 400,000 | ||
| Retained earnings | 310,000 | ||
| Total stockholders’ equity | $ | 2,060,000 |
2.
Number of shares outstanding after stock dividend = Existing number of shares + Number of shares issued as stock dividend
= 90,000+45,000
= 135,000
Kindly comment if you need further assistance.
Thanks‼!
ekkarill92 answered 9 hours agoRelated Solutions
On June 30, Sharper Corporation’s stockholders' equity section of its balance sheet appears as follows before...
On June 30, Sharper Corporation’s stockholders' equity section of
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Common stock—$10 par value, 120,000 shares authorized, 52,000
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