The owners’ equity accounts for Overby International are shown here: a. Assume t

Question

The owners’ equity accounts for Overby International are shown here:
  

   
a. Assume the company's stock currently sells for $26 per share and a stock dividend of 10 percent is declared.
  
How many new shares will be distributed? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)
  
New shares issued            
  
Show the new balance for each equity account. (Do not round intermediate calculations and round your answers to the nearest whole number, e.g., 32.)
  

  
b. Now assume that instead the company declares a stock dividend of 14 percent.

How many new shares will be distributed? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)

New shares issued            

Show the new balance for each equity account. (Do not round intermediate calculations and round your answers to the nearest whole number, e.g., 32.)

Common stock ($1 par value) $ 65,000 Capital surplus 221,000 Retained earnings 730,000 Total owners’ equity $ 1,016,000

Explanation / Answer

Initially, No. of shares = 65,000 with par value of $1

After 10% stock dividends, new no. of shares = 65,000 x (1 + 10%) = 71,500

New shares = 71,500 - 65,000 = 6,500

Common Stock = 71,500 x 1 = 71,500

Retained Earnings = 730,000 - 6,500 x 26 = 561,000

Capital Surplus = 221,000 + 6,500 x (26 - 1) = 383,500

Total equity = 1,016,000

Common stock 65,000 71,500 74,100 Capital surplus 221,000 383,500 448,500 Retained earnings 730,000 561,000 493,400 Total owners’ equity 1,016,000 1,016,000 1,016,000 No. of shares 65,000 71,500 74,100 New shares 6,500 9,100

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.