Rocco Corporation decides to issue a 7.5% stock dividend on 20,000 outstanding shares of $10 stated value common stock. The distribution is made at the time the market value of the stock is $50 a share. How will the entry to record this transaction affect the company's equity accounts?

Question

Quizplus · Accepted Answer

20,000 shares × 7.5% = 1,500 shares; the common stock account is increased by $15,000 (1,500 shares × $10 stated value); the paid-in capital in excess of par value − common account is increased by $60,000 (1,500 shares × $40 diff. btw. market and stated value); the retained earnings account is decreased by the total value of the stock dividend ($15,000 + $60,000).

Rocco Corporation Decides to Issue a 7