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An owner of 2,500 shares of Simmons Company common stock receives a stock dividend of 50 shares. a. What is the effect of the stock dividend on the stockholder’s proportionate interest (equity) in the corporation? b. How does the total equity of 2,550 shares compare with the total equity of 2,500 shares before the stock dividend?

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Financial Accounting

15th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337272124

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BuyFindarrow_forward

Financial Accounting

15th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337272124
Chapter 13, Problem 4DQ
Textbook Problem
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An owner of 2,500 shares of Simmons Company common stock receives a stock dividend of 50 shares.

  1. a. What is the effect of the stock dividend on the stockholder’s proportionate interest (equity) in the corporation?
  2. b. How does the total equity of 2,550 shares compare with the total equity of 2,500 shares before the stock dividend?

a.

To determine

Explain the effect of the stock dividend on the stockholders’ proportionate equity in the corporation.

Explanation of Solution

Stock Dividends: When the dividends are declared and paid to the common stockholders in the form of shares of stock, it is known as stock dividends. Stock dividends option is preferred by the board of directors in the event of scarcity of cash or when cash is required for urgent business ...

b.

To determine

Explain the effect of the stock dividend on the total stockholders’ equity in the corporation.

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Chapter 13 Solutions

Financial Accounting
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