Question

On January 1, 2021, Swifty Corporation had 106000 shares of its $5 par value common stock outstanding. On June 1, the corporation acquired 10300 shares of stock to be held in the treasury. On December 1, when the market price of the stock was $13, the corporation declared a 15% stock dividend to be issued to stockholders of record on December 16, 2021. What was the impact of the 15% stock dividend on the balance of the retained earnings account?

Answer 1

Decrease by $186,615

Step-by-step explanation:

The impact of the 15% stock dividend on the balance of the retained earnings account is shown below:-

Shares = 106000 - 10300

= 95,700

Dividend of 15% = 95,700 × 15%

= $14,355

Value of shares = Dividend × Market price of the stock

= $14,355 × $13

= $186,615

So, the retained earning will decrease by $186,615