Gulf Oil Inc. reported the following common equity account in its balance sheet.
ID: 2718408 • Letter: G
Question
Gulf Oil Inc. reported the following common equity account in its balance sheet. The company just declared a 10 percent stock dividend when the market value of its stock was $20 per share. What is the capital surplus account after the 10 percent stock dividend?
Common stock ($1 par value)
$ 406,000
Capital Surplus
1,340,000
Retained earnings
3,427,000
Total owners’ equity
$ 5,173,000
$1,380,600
$568,600
$1,218,000
$2,111,400
$3,467,600
Common stock ($1 par value)
$ 406,000
Capital Surplus
1,340,000
Retained earnings
3,427,000
Total owners’ equity
$ 5,173,000
Explanation / Answer
Common stock is 406,000.00 and 10% of it = 40600.00 stock dividend
Market value is $ 20.00 per share it means $ 19.00 is premium because share prize is $ 1.00 only
So capital surplus is 40600.00*19$ =$ 771,400.00
Total capital surplus = $ 1340000.00 + $ 771400.00 = $ 2111400.00
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