1. A stock dividend will: A. Increase common stock dividend distributable B. Inc
ID: 2457359 • Letter: 1
Question
1. A stock dividend will:
A. Increase common stock dividend distributable
B. Increase the total stockholder's equity
C. Increase the par or stated value per share
D. Decrease total assets
2. Kat and Stevens agree to accept Nugent as a partner upon his investment of $50,000 cash. Nugent is to receive a 20% ownership interets in the new partnership. Any bonus is attributable to the existing partners and is shared equally. Kat and Stevens combined capital (before Nugents investment) totals $180,000.
A.) Nugent's Credit to capital equals $50,000
B.) Nugent's credit to capital equals $46,000
C.) Total Partnership capital would increase by $46,000
D.) Total Partnership would decrease by $50,000
Explanation / Answer
Stock dividends are similar to cash dividends; however, instead of cash, a company pays out stock. As a result, a company's shares outstanding will increase, and the company's stock price will decrease. For example, suppose A ltd decides to issue a 10% stock dividend. Each current stockholder will thus have 10% more shares after the dividend is issued
B. Increase the total stockholder's equity
Kat and Stevens capital = $ 180,000
Nugent Capital = $ 50,000
Total Capital = $ 180000+50000= $ 230000
Nugent % = 20
Nugent Cap = $ 230000*20%
= $ 46000
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