Question

The owners’ equity accounts for vulcano international are shown here:

common stock ($ .50 par value) $ 20,000
capital surplus 210,000
retained earnings 587,300

total owners’ equity $ 817,300

assume the company's stock currently sells for $42 per share and a stock dividend of 10 percent is declared. a-

1. how many new shares will be distributed?

Answer 1

To find out how many new shares Vulcano International will distribute, calculate the current number of shares by dividing the value of the common stock by its par value and then apply the 10 percent stock dividend. This results in the distribution of 4,000 new shares.

Step-by-step explanation:

How many new shares will be distributed by Vulcano International if a stock dividend of 10 percent is declared and the stock currently sells for $42 per share?

Firstly, to determine the number of new shares to be distributed, we need to know the total number of shares currently outstanding. Since the common stock is valued at $20,000 and has a par value of $0.50 per share, we can calculate the current number of shares as $20,000 divided by $0.50, which equals 40,000 shares. Then, a 10 percent stock dividend means that for every 100 shares owned, an additional 10 shares will be distributed.

This calculation is made: 40,000 shares × 10% = 4,000 new shares.

Therefore, Vulcano International will distribute 4,000 new shares as a result of the 10 percent stock dividend based on the current number of shares outstanding.