Question

Boats and Bait has 78,000 shares outstanding that sell for a price of $74 per share. The stock has a par value of $2 per share. The company's balance sheet shows capital surplus of $185,000 and retained earnings of $225,000. If the company declares a stock dividend of 17.5 percent, what is the new common stock value on the balance sheet?

Answer 1

$183,300

Step-by-step explanation:

The computation is shown below:

Value of common stock value on the balance sheet prior to the stock dividend is

= No of stock outstanding × Face value per share

= 78,000 × $2

= $156,000

Now

New shares to be issued is

= 78,000 × 0.175

= 13,650 shares

So,

Total shares outstanding after stock issue is

= 78,000 + 13,650

= 91,650 shares

Now the value of common stock after stock dividend is

= 91,650 × $2

= $183,300