Coronado Inc. has retained earnings of $780000 and total stockholders’ equity of $2100000. It has 302000...

Coronado Inc. has retained earnings of $780000 and total stockholders’ equity of $2100000. It has 302000 shares of $5 par value common stock outstanding, which is currently selling for $30 per share. If Coronado declares a 10% stock dividend on its common stock:

net income will decrease by $151000.

retained earnings will decrease by $151000 and total stockholders’ equity will increase by $151000.

retained earnings will decrease by $906000 and total paid-in capital will increase by $906000.

retained earnings will decrease by $906000 and total stockholders’ equity will increase by $906000.

Expert Solution

SOLUTION :
		CALCULATION OF TOTAL VALUE OF STOCK DIVIDEND
		Numer of Common Shares Issued and outstanding = (A)	302,000	Shares
		Stock Dividend Declared % of total shares issued and outstanding (B)	10%
		Stock Dividend Declared Shares to be issued (C = AXB)	30,200	Shares
		Market Value of 1 Shares on date of declaration (D)	$ 30.00	Per Shares
		Par Value of the one shares	$ 5.00	Per Shares
		Addittional Paid in Captial (Market Value - Par Value) (F)	$ 25.00	Per Shares

		Total value of dividend = (CXD)	$ 906,000
		Par value of the Common Stock Dividend (CXE)	$ 151,000
		Value of Addittional paid in Capital (CXF)	$ 755,000





Journal Entries
Sr. No.	Date	Account Title and explanation	Debit	Credit

1	----------	Retained Earnings	$ 906,000
		Stock Dividend Distributable		$ 151,000
		Paid in Capital in Excess of Par - Common Stock		$ 755,000
		(To record the stock dividend declaration)


	IT means retained earnings will decrease by this transaction by $ 906,000 and total shareholders' will increase by $ 906,000


	Answer = Option 3 = retained earnings will decrease by $906000 and total stockholders’ equity will increase by $906000.

ekkarill92 answered 1 year ago

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