Quirk Corporation issued a 100% stock dividend of its common stock which had a par value of $10 before and after the dividend. At what amount should retained earnings be capitalized for the additional shares issued?

Question

Quizplus · Accepted Answer

When a company issues a 100% stock dividend, the par value of the stock remains the same. In this case, the par value of the common stock was $10 before and after the dividend. Therefore, retained earnings should be capitalized at par value for the additional shares issued. Option A (no capitalization needed) and options C and D (fair value) are incorrect because the question specifically states that the stock has a par value, which is the appropriate amount to capitalize retained earnings.

Quirk Corporation Issued a 100% Stock Dividend of Its Common