The company with the common equity accounts shown here has declared a stock dividend of 10 percent at a time when the market value of its stock is $34 per share

a) given that number of shares oustanding before stock dividend=480,000/1=480,000.numbers.

note: after 10% stock dividend the the total number of common shares outstanding will be increased by 10%.

so , total number of common shares outstanding after stock dividend=480,000*1.1=528,000.numbers.

number of new shares=528,000-480,000=48,000.

b) Shares issued in a small stock dividend (25% or less of the total shares outstanding) are valued at the fair
value of the shares on the date of declaration:

Dr Retained earnings ..................... fair value of shares distributed
Cr Common shares – issuable as a dividend ........ par value of shares
Cr Additional paid-in capital – common shares ...... balancing amount.

given that fair value of one share=34.

so fair value of all shares distributed=34*48,000=1,632,000.

so entry will be like this.

Dr Retained earnings ..................... 1,632,000.
Cr Common shares – issuable as a dividend ........ 48,000.
Cr Additional paid-in capital – common shares ...... 1,584,000.

so equity accounts after stock dividend is as follows.

common stock=480,000.+ 48,000.= 528,000.

additional paid in capital=865,000+1,584,000.=2,449,000.

retained earnings=3,910,800-1,632,000.=2,278,800.