The stockholders\' equity of Howell Company at July 31, 2012 is presented below:
ID: 2425617 • Letter: T
Question
The stockholders' equity of Howell Company at July 31, 2012 is presented below:
Common stock, par value $20, authorized 400,000 shares;
issued and outstanding 160,000 shares
$3,200,000
Paid-in capital in excess of par
160,000
Retained earnings
650,000
$4,010,000
On August 1, 2012, the board of directors of Howell declared a 10% stock dividend on common stock, to be distributed on September 15th. The market price of Howell's common stock was $35 on August 1, 2012, and $38 on September 15, 2012. What is the amount of the debit to retained earnings as a result of the declaration and distribution of this stock dividend?
Common stock, par value $20, authorized 400,000 shares;
issued and outstanding 160,000 shares
$3,200,000
Paid-in capital in excess of par
160,000
Retained earnings
650,000
$4,010,000
Explanation / Answer
Answer No. of Shares Isuued as Stock Dividend = 160,000 shares X 10% = 16000 Shares Amount Debited to Retained Earnings = 16000 Shares X $35 (MP od Stock on Aug.1, 2012) = $560,000 (as a result of declaration of Stock dividend)
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