On December 31, 2017, when the Conn Company's stock was selling at $36 per share, its capital accounts were as follows: Capital stock (par value $20, 100,000 shares issued) $2,000,000
Premium on capital stock 800,000
Retained Earnings 4,550,000
If a 100 percent stock dividend were declared and the par value per share remained at
$20

Question

Quizplus · Accepted Answer

A 100 percent stock dividend means that the number of shares outstanding would double, resulting in 200,000,000 shares issued. The par value remains at $20, so the new capital stock balance would be $4,000,000 ($20 x 200,000,000 shares). Therefore, the correct answer is C, capital stock would increase to $4,000,000. No entry needs to be made to record the dividend because it is not a cash transaction.

On December 31, 2017, When the Conn Company's Stock Was