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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, 52,000 shares issued and outstanding $ 520,000
Paid-in capital in excess of par value, common stock 210,000
Retained earnings 665,000
Total stockholders’ equity $ 1,395,000

Exercise 13-6 Large stock dividend LO P2

Required:
(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.

Number of shares outstanding before stock dividend = 52,000

Stock dividend = 50%

Number of shares issued in stock dividend = Number of shares outstanding before stock dividend x Stock dividend percentage

= 52,000 x 50%

= 26,000

In case of large stock dividend, par value of shares is considered.

After stock dividend, retained earnings will decrease by = Number of shares issued in stock dividend x Par value of 1 share

= 26,000 x 10

= $260,000

After stock dividend, common stock will increase by = Number of shares issued in stock dividend x Par value of 1 share

= 26,000 x 10

= $260,000

Common stock—$10 par value, 120,000 shares authorized, 78,000 shares issued and outstanding $ 780,000
Paid-in capital in excess of par value, common stock 210,000
Retained earnings 405,000
Total stockholders’ equity $ 1,395,000

2.

Number of shares outstanding after stock dividend = Number of shares outstanding before stock dividend + Number of shares issued in stock dividend

= 52,000 + 26,000

= 78,000

ekkarill92 answered 2 years ago
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