awrenceville Co. reported the following: Common stock, $3 par, 10,000 shares aut

Question

awrenceville Co. reported the following: Common stock, $3 par, 10,000 shares authorized, 5,000 shares issued and outstanding What is the effect of a 10% stock dividend if the market price of the common stock is $30 per share when the dividend is declared? a. A stock dividend has no effect on any stockholders' equity accounts. b. Additional Paid-In Capital decreases $30,000. c. Retained earnings in the amount of $15,000 is transferred to the contributed capital accounts. d. Cash decreases $30,000.

Explanation / Answer

Stock dividend 5000*10% 500 shares issued retained earnings (500*30) Debit 15000 Common stock div dist (500*3) credit 1500 Addittional paid in capital (500*27) Credit 13500 thus we see option c) is the correct answer Retained earnings in the amount of $15000 is transferred to the contributed capital accounts

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