Question

Boats and bait has 55,000 shares outstanding that sell for a price of $51 per share. the stock has a par value of $1 per share. the company's balance sheet shows capital surplus of $70,000 and retained earnings of $110,000. if the company declares a stock dividend of 10 percent, what is the new common stock value on the balance sheet? multiple choice

O $198,000
O $77,000
O $60,500
O $137,500
O $258,500

Answer 1

The new common stock value on the balance sheet after declaring a stock dividend of 10 percent is $0.91 per share.

Step-by-step explanation:

The new common stock value on the balance sheet after declaring a stock dividend of 10 percent can be calculated by multiplying the number of shares outstanding by the par value. In this case, there are 55,000 shares outstanding with a par value of $1 per share, so the initial common stock value on the balance sheet is $55,000.

When the stock dividend of 10 percent is declared, 10 percent of the outstanding shares (55,000 x 0.10 = 5,500 shares) will be distributed as additional shares. The common stock value on the balance sheet will remain the same, but the number of shares outstanding will increase to 55,000 + 5,500 = 60,500 shares.

Therefore, the new common stock value on the balance sheet is $55,000 with 60,500 shares outstanding, resulting in a new common stock value of $55,000 / 60,500 = $0.91 per share.