Question

Explain how to calculate the after stock dividend to enter on the balance sheet for the below.

At the beginning of the year, the stockholders' equity section of the balance sheet of Solutions Corporation reflected the following:

Common stock ($12 par value; 65,000 shares authorized, 30,000 shares outstanding) = $360,000
Additional paid-capital = $120,000
Retained earnings = $580,000

On February 1, the board of directors declared a 60 percent stock dividend to be issued April 30. The market value of the stock on February 1 was $15 per share. The market value of the stock on April 30 was $18 per share.

For comparative purposes, prepare the Stockholders’ Equity section of the balance sheet immediately before the stock dividend and immediately after the stock dividend.

 

  Before Stock Dividend After Stock Dividend
Contributed capital:    
   Common stock $360,000  
    Additional paid-in capital 120,000  
Retained  earnings 580,000  
Total Stockholders equity 1,060,000  

 

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