APPLY THE CONCEPTS: Determine the change to Stockholders\' Equity A stock divide

Question

APPLY THE CONCEPTS: Determine the change to Stockholders' Equity A stock dividend changes the composition of Stockholders' Equity on the balance sheet. Value is removed from retained earnings and shifted to contributed capital in the form of common stock and additional paid-capital. Complete the following partial balance sheet to show the new balances after the stock distribution. APPLY THE CONCEPTS: Determine the effect on stockholders You've examined how a stock dividend affects the company, and you know that the total number of shares outstanding has increased by 10%. What does this mean for shareholders? Assume that you are a shareholder who owns 15% of the company in question prior to the stock dividend. Based on what you know about the effects of a stock dividend, fill in the table concerning the post-stock dividend situation.

Explanation / Answer

Stockholder's Equity Change New balance Common stock, 10par value, 25000 shares authorized and 10000 share issue and outstanding $100000 $10000 $110000 Additional - paid in capital - common $220000 $22000 $242000 Retained earnings $430000 $32000 $398000 Total stock holders Equity $750000 $750000 Before stock dividend After stock dividend Total share issued by company 10000 11000 Number of share owned 1500 1650 Proportionate ownership 15% 15%

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