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The stockholders' equity section of Sheffield Corporation consists of common stock ($10 par) $2,650,000 and retained earnings $532,000
The stockholders' equity section of Sheffield Corporation consists of common stock ($10 par) $2,650,000 and retained earnings $532,000. A 10% stock dividend (26,500 shares) is declared when the market price per share is $14. Show the before-and-after effects of the dividend on the following. (a) (b) (c) The components of stockholders' equity. Shares outstanding. Par value per share. Before Dividend After Dividend Stockholders' equity $ $ Outstanding shares Par value per share $ $ Click if you would like to Show Work for this question: Open Show Work
Expert Solution
| Before Dividend | After Dividend | |
| Stockholders' Equity |
$3,182,000 [Refer working note 1] |
$3,182,000 [Refer working note 1] |
| Shares Outstanding |
265,000 [Common stock total par value / Par value per common share] [$2,650,000 / $10] |
291,500 [Shares outstanding before stock dividend + Stock dividend share] [265,000 + 26,500] |
| Par value per share |
$10 [Mentioned in the question] |
$10 [Stock dividend do not change par value per share] |
.
.
| Working note 1 | ||
| Before stock dividend | After stock dividend | |
| Common stock (including additional paid in capital) (a) | $2,650,000 |
$3,021,000 [Refer working note 2] |
| Retained Earnings (b) | $532,000 |
$161,000 [Refer working note 4] |
| Total Stockholders' Equity (a + b) | $3,182,000 | $3,182,000 |
.
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| Working note 2 - Calculation of common stock (Common stock includes additional paid in capital) | |
| Common Stock (Before stock dividend) | $2,650,000 |
| Add: Stock dividend [Refer working note 3] | $371,000 |
| Common stock (After stock dividend) | $3,021,000 |
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| Working note 3 - Calculation of stock dividend | |
| Number of shares issued as stock dividend (a) | 26,500 |
| Market value per share (b) | $14 |
| Stock dividend (a x b) | $371,000 |
.
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| Working note 4 - Calculation of ending retained earnings balance: | |
| Retained earnings (Before stock dividend) | $532,000 |
| Less: Stock Dividends [Refer working note 3] | $371,000 |
| Retained earnings (After stock dividend) | $161,000 |
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