The stockholders' equity of Anamanda Company at September 30, 2012, is presented below: $$\begin{array}{l}
\begin{array} {lll }
\text {Common Stock, par value \$ 10, authorized 500,000 shares; 200,000 }&\
\text {shares issued and outstanding}&\$2,000,000\
\text {Paid-In Capital in Excess of Par }&300,000\
\text {Retained Earnings}&1,300,000\
&\$3,600,000\
\end{array}
\end{array}$$ On October 1, 2012, the Board of Directors of Anamanda declared a 10% stock dividend to be distributed on November 10.The market price of the common stock was $15 on October 1 and $17 on November 10.What is the amount of the charge to retained earnings as a result of the declaration and distribution of this stock dividend?

Question

The stockholders' equity of Anamanda Company at September 30, 2012, is presented below: $$\begin{array}{l}
\begin{array} {lll } 
\text {Common Stock, par value  \$ 10, authorized 500,000 shares; 200,000 }&\
\text {shares issued and outstanding}&\$2,000,000\
\text {Paid-In Capital in Excess of Par }&300,000\
\text {Retained Earnings}&1,300,000\
&\$3,600,000\
\end{array}
\end{array}$$ On October 1, 2012, the Board of Directors of Anamanda declared a 10% stock dividend to be distributed on November 10.The market price of the common stock was $15 on October 1 and $17 on November 10.What is the amount of the charge to retained earnings as a result of the declaration and distribution of this stock dividend?

Quizplus · Accepted Answer

The charge to retained earnings for a stock dividend is calculated based on the market price at the time of declaration. The stock dividend is 10% of 200,000 shares, which is 20,000 shares. At the market price of $15 per share on October 1, the charge to retained earnings is 20,000 shares * $15 = $300,000.

The Stockholders' Equity of Anamanda Company at September 30, 2012