In: Accounting
Ben owns 1,000 shares of XYZ corp. worth $10,000. During the year he receives an additional 200 shares of this stock as a stock dividend. His shares are now worth $12,500. How much income does Ben have to income in income because of the stock dividend?
Ben owns 1000 shares of XYZ corp worth $10000.
The value of each share = $10000 ÷ 1000 shares
= $10
The value of each share before receiving stock dividend = $10 per share
During this year he receives 200 additional shares of this stock as stock dividend.
Total number of shares after receiving stock dividend :-
= 1000 shares + 200 shares
= 1200 shares
The worth of all the 12000 shares are $12500
Ben has got 200 shares as stock dividend.
The income of Ben because of the stock dividend = value per share before stock dividend × number of shares received as stock dividend
Income because of stock dividend :-
= $10 × 200 shares
= $2000
Ben's income because of stock dividend = $2000
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