Question

Westhaven Corp. currently has 34,000 shares outstanding that sell for $66 per share. The company plans to issue a stock dividend of 20 percent. The stock has a par value of $2. What is the total capital surplus on the new shares

Answer 1

$435,200

Step-by-step explanation:

For computing the capital surplus first we have to find out the new shares issued which is shown below:

Issued of new shares is

= Stock dividend × Number of Shares Outstanding

= 20% × 34,000

= 6,800

Now

Total capital Surplus = Number of new shares issued × (Share Price - Par Value)

= 6,800 shares × ($66 - $2)

= $435,200

We simply used the above formula in order to find out the total capital surplus