Question

On January 1, 2016, Proven Technology Corporation's common shares account had a balance of $250,000, representing 25,000 shares issued at $10 per share. On May 15, 2016, 12,000 shares were issued for $150,000 cash. On August 31, 2016, a 10% stock dividend was declared and distributed. What is the balance in Common Shares appearing on the statement of shareholders' equity on December 31, 2016?

a) $400,000
b) $440,000
c) $415,000
d) $300,000

Answer 1

The balance in the Common Shares account on December 31, 2016 is $550,000.

Step-by-step explanation:

The balance in the Common Shares account on December 31, 2016 can be calculated by considering the transactions that occurred during the year.

Starting with the initial balance of $250,000 for 25,000 shares, the company issued an additional 12,000 shares for $150,000 cash. This increases the total number of shares to 37,000.

Next, a 10% stock dividend was declared and distributed. Since the dividend is in the form of additional shares, the number of shares will increase by 10% of the current total, which is 37,000. This equals 3,700 additional shares.

Therefore, the balance in the Common Shares account on December 31, 2016 would be the initial balance plus the additional shares issued, which is $250,000 + $150,000 + $150,000 = $550,000. And the total number of shares would be the initial shares plus the additional shares, which is 25,000 + 12,000 + 3,700 = 40,700.