Question

Universe Co. issued 500,000 shares of common stock in the current year. Universe declared a 30% stock dividend. The market value was $50 per share, the par value was $10, and the average issue price was $30 per share. By what amount will Universe decrease shareholders’ equity for the dividend?

Answer 1

The amount of $0 will decrease the shareholders equity for the dividend.

Step-by-step explanation:

Stock Dividend is the kind of dividend in which the payment of dividend done in the form of additional or extra shares instead of a cash payout.

So, when the stock dividend is declared, then the portion of the retained earnings is re- classified as the contributed capital.

Therefore, the net effect on the aggregate equity will be $0.