Question

A corporation declared and issued a 20% stock dividend on October 1. The following information was available immediately prior to the dividend: Retained earnings $ 760,000 Shares issued and outstanding 61,000 Market value per share $ 16 Par value per share $ 5 The amount that contributed capital will increase (decrease) as a result of recording this stock dividend is:

Answer 1

$195,200 increase

Step-by-step explanation:

The computation of the amount of the contributed capital increase or decrease is shown below:

Given that

Stock Dividend = Outstanding shares × 20%

= 61,000 Shares × 20%

= 12,200 shares

Now the Value of Stock Dividend is

= Number of Shares × Market Value per share

= 12,200 Shares × $16

= $195,200

There is an increase in the contributed capital