Mary, a shareholder in the Doggy Boutique, owns 500 share of their common stock, which represents 20% of the outstanding common stock of Doggy Boutique. Mary receives a 10% stock dividend. After the stock dividend, Mary will have:

Question

Quizplus · Accepted Answer

A 10% stock dividend means that Mary will receive an additional 10% of her current share holdings, which is 50 shares (500 x 0.1). Therefore, Mary's total number of shares will increase from 500 to 550. However, the outstanding common stock of Doggy Boutique will also increase by 10%, which means that there will now be 5,500 outstanding shares (5,000 x 1.1). Mary's ownership percentage can be calculated by dividing her 550 shares by the new outstanding shares of 5,500: 550/5,500 = 0.10, or 10%. Therefore, Mary will still have a 20% ownership in Doggy Boutique's common stock, but this will not change after the stock dividend.

Mary, a Shareholder in the Doggy Boutique, Owns 500 Share