Gordon's Meats has 6,500 shares of stock outstanding. The market value is $26.50 per share. The balance sheet shows $48,200 common stock account, and $142,900 in the retained earnings account. The firm just announced a 5 percent stock dividend. What will the balance be in the retained earnings account after the dividend?

Question

Quizplus · Accepted Answer

The stock dividend is 5% of 6,500 shares, which is 325 shares. The market value per share is $26.50, so the total value of the dividend is 325 * $26.50 = $8,612.50. The retained earnings account will decrease by this amount, so the new balance is $142,900 - $8,612.50 = $134,287.50.

Gordon's Meats Has 6,500 Shares of Stock Outstanding