On March 1, Pluto Corporation declared and issued a 10% stock dividend on its 20

Question

On March 1, Pluto Corporation declared and issued a 10% stock dividend on its 200,000 outstanding shares of S3 par value common stock. On September 1, Pluto declared a 3-for-1 stock slit and changed its par value accordingly. The market value of Pluto's stock was S20 per share on March 1 and S24 per share on September 1. On February 28, Pluto's stockholders' equity appeared as follows: Stockholders Equity February 28:Common stock (200,000 S3 par shares issued Paid-in capital in excess of par Contributed capital Retained earnings Total Stockholders' equity 5600.000 1.800.000 2.400.000 1.600.000 ' 54,000,000 Required: In the space below prepare, in good form, the stockholders' equity section after the stock split. No partial credit will be awarded without detailed computations. Stockholders' Equity September 1:

Explanation / Answer

Stock Dividend paid = 10% of 200000 = 20000 shares

Value of stock newly issued = 20000 * 20 = 400000

Common stock part = 20000 * 3 = 60000

Additional capital part = 400000 - 60000 = 340000

Stock split does not have any change in the dollar value of stockholder equity. ONLY THE NUMBER OF SHARES CHANGE

Stockholder Equity As on 1st october

Common Stock = 600000 + 60000= 660000 (660000 shares 0f $1 each post 3:1 split)

Additional Paid in capital = 1800000 + 340000 = 214000

Contributed capital = 660000 + 2140000 = 2800000

Retained earnings = 1600000 - 400000 = 1200000

Stockholder equity = 2800000 + 1200000 = 4000000

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