The company with the common equity accounts shown here has declared a 7 percent stock dividend at a time when the market value of its stock is $65 per share.
Common stock ($1 par value): $530,000
Capital surplus: $1,561,000
Retained earnings: $3,890,000
Total owners' equity: $5,981,000
Show the new equity account balances after the stock dividend distribution.
When shares are issued by a firm, the investors become the shareholders of the firm and are paid dividends out of profits as per the pay-out policy. Dividends are of two types: cash dividends, which are given in the form of cash, and stock dividends, which are given in the form of additional shares. A stock dividend is given as a percentage and reduces retained earnings.
Answer and Explanation: 1
The new equity account balances after the stock dividend distribution:
|Common stock ($1 par value)||$567,100|
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fromChapter 16 / Lesson 7
Dividends are the company's payments to shareholders, and stock splits are where an individual share can be divided, making it more affordable. See how corporations manage stocks regarding ownership, dividends, capital gains, and stock splits.