Question

The stockholders' equity section of the balance sheet for Pokagon Corporation appeared as follows before its recent stock dividend: Common stock, $10 par, 10,000 shares issued and outstanding $ 100,000 Additional paid-in capital - common 120,000 Retained earnings 150,000 Total stockholders' equity $370,000 Pokagon declared a 10% stock dividend when the market price per share was $20. After the stock dividend was distributed, the components of the stockholders' equity section were:

Answer 1

Common stock = $110,000

Additional Paid in capital = $130,000

Retained earnings = $130,000

Step-by-step explanation:

The computation of stockholders' equity is given below:

Common stock = Outstanding shares + (Stock dividend percentage × Shares issued × Par value per share)

= 100,000 + (10% × 10,000 × $10)

= $110,000

Additional Paid in capital = Additional paid-in capital - common + (Stock dividend percentage × Shares issued × (Market price per share - Par value per share))

= 120,000 + (10% × 10,000 × ($20 - $10))

= $130,000

Retained earnings= Retained earning(Given) - (Stock dividend percentage × Outstanding shares × Market price per share)

= 150,000 - (10% × 100,000 × $20)

= $130,000