Ask Question
30 May, 04:36

The stockholders' equity section of Blue Spruce Corp.'s balance sheet consists of common stock ($8 par) $1,104,000 and retained earnings $460,000. A 10% stock dividend (13,800 shares) is declared when the market price per share is $18. (a) Show the before-and-after effects of the dividend on the components of stockholders' equity. (b) Show the before-and-after effects of the dividend on the shares outstanding.

+4
Answers (1)
  1. 30 May, 06:52
    0
    Only the retained earning changed from $460,000 before the dividend payment to $211,600 after the dividend payment. The total shareholders' equity remain at $1,564,000 before and after the dividend payment.

    Explanation:

    Note: The two questions (a) and (b) in the question are the same and they just one question which is answered as follows:

    Before dividend payment

    Common Stock = $1,104,000

    Shares outstanding = $1,104,000 : 8 = 138,000

    Retained earning = $460,000

    Total Stockholders' Equity = $1,104,000 + $460,000 = $1,564,000

    After Dividend

    Shares outstanding = 138,000 + (138,000 * 10%) = 138,000 + 13,000 = 151,800

    Common Stock = $1,104,000 + (13,800 * 8) = $1,104,000 + $110,400 = $1,214,400

    In excess of par value = 0 + (13,800 * 10) = $138,000

    Total Paid-In Capital = $1,214,400 + $138,000 = $1,352,400

    Retained Earnings = $460,000 - (13,800 * 18) = $460,000 - 248,400 = $211,600

    Total Stockholders' Equity = $1,352,400 + $211,600 = $1,564,000

    Concluding Note

    From the above, only the retained earning changed from $460,000 before the dividend payment to $211,600 after the dividend payment. The total shareholders' equity remain at $1,564,000 before and after the dividend payment.
Know the Answer?
Not Sure About the Answer?
Get an answer to your question ✅ “The stockholders' equity section of Blue Spruce Corp.'s balance sheet consists of common stock ($8 par) $1,104,000 and retained earnings ...” in 📙 Business if there is no answer or all answers are wrong, use a search bar and try to find the answer among similar questions.
Search for Other Answers