Question

Use the following to answer questions 13 - 17

KC Corp.'s management is considering either a 100% stock dividend or a 2-for-1 stock split.

Complete the following chart to assist in answering the following:

 

13. $_________ After the 100% stock dividend what amount is in Total paid-in capital account?

14. $_________ After the 100% stock dividend what amount is in the retained earnings account?

15. $_________ After the 100% stock dividend what is the par value per share?

16. $_________ After the 2-for-1 stock split what amount is in Total paid in capital account?

17. $ _________ After the 2-for-1 stock split what is the par value per share?

Answer 1

13. Total paid-in capital after 100% stock dividend

Total paid-in capital before 100% stock dividend = $9,200,000

100% Stock dividend issued = Number of shares*par value per share

                                                  = 500,000 shares* 0.20

                                                  = $100,000

 

Total paid-in capital after 100% stock dividend = Total paid-in capital before the stock dividend + stock dividend value

                                                                                   = $9,200,000 + $100,000

                                                                                   = $9,300,000

 

14. Retained earnings after 100% stock dividend

Retained earnings before 100% stock dividend =$1,253,000

Stock dividend value= $100,000

 

The 100% stock dividend amount will be deducted from the  Retained earnings.

Retained earnings after 100% stock dividend = Retained earnings before 100% stock dividend - stock dividend  value

                                                                                 = $1,253,000-$100,000

                                                                                 = $1,153,000

 

15.Par value per share after 100% stock dividend

Since the increase in the total paid-up capital is reduced from the retained earning. There is no change in the par value per share.

Par value per share after 100% stock dividend=$0.20

 

16. Total paid up capital after 2 for 1 share split

Number of shares after the share split=Number of shares before the share split * split ratio

 

The common stock after the share split = 1000,000 * $0.10 per share = $100,000

 

Therefore total paid-in capital after the share split = $9,200,000.

 

17.Par value per share after the share split

 

Per value per share after the share split = $0.10 per share.