Ducheyne Electric recently declared a 15 percent stock dividend.On the date of the stock dividend Ducheyne had 16 million shares outstanding priced at $46 per share in the market.An accounting entry was required on the balance sheet transferring some retained earnings to the common stock account.If retained earnings was $280 million prior
To the transaction, what was the dollar amount of retained earnings after the transfer?

Question

Quizplus · Accepted Answer

A 15% stock dividend on 16 million shares results in 2.4 million new shares (16 million * 0.15). The market price per share is $46, so the total value of the stock dividend is $110.4 million (2.4 million * $46). This amount is transferred from retained earnings to the common stock account. Therefore, the new retained earnings balance is $169.6 million ($280 million - $110.4 million).

Ducheyne Electric Recently Declared a 15 Percent Stock Dividend