The Percolator Company has the following capital structure: ? $\begin{array}{ll}
\text { Common stock ( } \$ 5 \text { par, } 250,000 \text { shares) } & \$ 1,250,000 \
\text { Contributed capital in excess of par } & \$ 5,000,000 \
\text { Retained earnings } & \$ 4,000,000
\end{array}$ ?The company declares a 10% stock dividend. The pre-stock dividend market price of the company's stock is $50.
Determine the balance in the common stock account after the stock dividend.
A) $1,250,000
B) $1,375,000
C) $125,000
D) $2,500,000

Question

Quizplus · Accepted Answer

A 10% stock dividend on 250,000 shares results in 25,000 additional shares. Since the par value is $5, the common stock account increases by $125,000 (25,000 shares * $5), making the new balance $1,375,000 ($1,250,000 + $125,000).

The Percolator Company Has the Following Capital Structure: ?The Company Declares a 10% Stock Dividend