Question

On January 1, 2020, Coleman Rubber declared a 15% stock dividend. At the time of declaration, Coleman’s common stock was selling for $30 per share. Before the stock dividend was declared, Coleman’s stockholders’ equity was:

Answer 1

The total equity will not change but, their composition will.

RE decrease by 180,000

common stock increase by 60,000

addtional paid in CS increase by 120,000

Missing information:

Given the attached equity. What is the effect of the 15% dividends on the equity and composition:

Step-by-step explanation:

40,000 shares x 15% = 6,000 new shares

6,000 shares x $10 face value = 60,000

6,000 shares x $30 face value = 180,000

the difference will be considered additional paid-in

The company is paying the current stockholders with more shares. Thus; is doing a distribution of the earnings

Retained earnings will decrease by 180,000

while common stock and aditional paid in CS will increase in the same magnitude