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The high table company stock has a market value of 30, has the following common equity accounts on its balance sheet
The high table company stock has a market value of 30, has the following common equity accounts on its balance sheet. Common stock ($1 par, 1,000,000 shares) 1,000,000 Contributed capital in excess of par $14,000,000 Retained earnings 62,000,000 Total common stockholders’ equity $77,000,000 If the firm declares a 5% stock dividend, what will be the retained earnings figure after the dividend is paid?
Expert Solution
Shares of Common stock = 1,000,000
Stock dividend = 5%
Number of shares of stock dividend = 1,000,000 * 5% = 50,000 shares
Market value of stock dividend = 50,000 * $30 = $1,500,000
Journal Entry.
Debit Retained Earnings $1,500,000
credit Common stock $50,000
Credit contributed Capital in excess of par = $1,450,000
.
Retained earnings after the dividend is paid = $62,000,000 - $1,500,000 = $60,500,000
Retained earnings after the dividend is paid = $60,500,000
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