Question

Stock Dividend Comparison Although Oriole Company has enough retained earnings legally to declare a dividend, its working capital is low. The board of directors is considering a stock dividend instead of a cash dividend. The common stock is currently selling at $34 per share. The following is Oriole's current shareholders' equity: Common stock, $10 par $400,000 Additional paid-in capital on common stock 800,000 Total contributed capital $1,200,000 Retained earnings 1,300,000 Total shareholders' equity $2,500,000 Required: 1. Assuming a 15% stock dividend is declared and issued, prepare the shareholders' equity section immediately after the date of issuance. Oriole Company Stockholders' Equity Common stock, $10 par $ Additional paid-in capital on common stock Total contributed capital $ Retained earnings Total shareholders' equity $ 2. Assuming, instead, that a 30% stock dividend is declared and issued, prepare the shareholders' equity section immediately after the date of issuance. Oriole Company Shareholders' Equity Common stock, $10 par $ Additional paid-in capital on common stock Total contributed capital $ Retained earnings Total shareholders' equity $ 3. Retained earnings are reduced by a small stock dividend than by a large stock dividend because a large stock dividend is computed based on .

Answer 1

Solution 1:

Stockholder equity section - Oriole company (15% stock dividend)
Particulars	Details	Amount
Common stock, $10 par, 46000 shares	40000*115%*$10	$460,000.00
Additional paid-in capital on common stock	$800,000 + (6000*$24)	$944,000.00
Total Contributed Capital		$1,404,000.00
Retained Earnings	$1,300,000 - $60,000 - $144,000	$1,096,000.00
Total Share holders Equity		$2,500,000.00

Solution 2:

Stockholder equity section - Oriole company (30% stock dividend)
Particulars	Details	Amount
Common stock, $10 par, 52000 shares	40000*130%*$10	$520,000.00
Additional paid-in capital on common stock		$800,000.00
Total Contributed Capital		$1,320,000.00
Retained Earnings	$1,300,000 - $120,000	$1,180,000.00
Total Share holders Equity		$2,500,000.00

Solution 3:

Retained earnings are reduced by a small stock dividend than by a large stock dividend because a large stock dividend is computed based on Par value of common stock while small stock dividend is computed based on market value of common stock.