Gordon Corporation reported the following equity section on its current balance sheet.The common stock is currently selling for $12.00 per share. $$\begin{array} { | l | r | }
\hline \begin{array} { l }
\text { Common Stock, } \$ 10 \text { Par, } 103,000 \text { shares authorized, } 58,000 \text { shares issued } \
\text { and outstanding }
\end{array} & \$ 580,000 \
\hline \text { Paid-in Capital in Excess of Par-Common } & 125,000 \
\hline \text { Retained Earnings } & 302,000 \
\hline \text { Total Stockholders' Equity } & \$ 1,007,000 \
\hline
\end{array}$$ What would be the total stockholders' equity after a 15% common stock dividend?

Question

Gordon Corporation reported the following equity section on its current balance sheet.The common stock is currently selling for $12.00 per share. $$\begin{array} { | l | r | } 
\hline \begin{array} { l } 
\text { Common Stock, } \$ 10 \text { Par, } 103,000 \text { shares authorized, } 58,000 \text { shares issued } \
\text { and outstanding }
\end{array} & \$ 580,000 \
\hline \text { Paid-in Capital in Excess of Par-Common } & 125,000 \
\hline \text { Retained Earnings } & 302,000 \
\hline \text { Total Stockholders' Equity } & \$ 1,007,000 \
\hline
\end{array}$$ What would be the total stockholders' equity after a 15% common stock dividend?

Quizplus · Accepted Answer

First, we need to calculate the value of the common stock dividend.

Number of shares outstanding = 120,000 
15% common stock dividend = 0.15 x 120,000 = 18,000 new shares

New total number of shares = 120,000 + 18,000 = 138,000

Par value of common stock = $1.00 
Total common stock = 120,000 shares x $1.00 par value = $120,000

New total common stock = 138,000 shares x $1.00 par value = $138,000

Additional paid-in capital = $660,000

Total stockholders' equity before dividend = $892,000

Value of 15% common stock dividend = 18,000 shares x $12.00 market price = $216,000

Total stockholders' equity after dividend = ($892,000 + $216,000) + $138,000 = $1,246,000

So, the correct answer is option C.

Gordon Corporation Reported the Following Equity Section on Its Current