On June 30, 2020, when Wenn Inc.'s shares were selling at $ 32 per share, its capital accounts were as follows: Common Shares, no par, 40,000 shares issued

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\begin{array}{ll}
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\quad\quad \text{and outstanding } & \quad\quad\quad \text{\$1,500,000 \quad \quad\quad\quad \quad } \

\text{ Retained Earnings........................................................................} & \quad \quad \quad \text{\ 2,600,000 \quad \quad \quad } \

\
\end{array}
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If a 5% stock dividend were declared and distributed, the Common Shares account balance would be

Question

On June 30, 2020, when Wenn Inc.'s shares were selling at $ 32 per share, its capital accounts were as follows: Common Shares, no par, 40,000 shares issued

$
\begin{array}{ll}
\

\quad\quad \text{and outstanding } &  \quad\quad\quad   \text{\$1,500,000     \quad \quad\quad\quad \quad   } \

\text{ Retained Earnings........................................................................} & \quad \quad   \quad \text{\ 2,600,000 \quad \quad \quad  } \

\ 
\end{array}
$

If a 5% stock dividend were declared and distributed, the Common Shares account balance would be

Quizplus · Accepted Answer

To calculate the balance in Common Shares after a 5% stock dividend, first calculate the number of additional shares to be issued:
40,000 shares x 5% = 2,000 shares
Then, add those shares to the number of shares previously issued:
40,000 shares + 2,000 shares = 42,000 shares
Next, multiply the new number of shares by the par value of $0 to get the total balance in the Common Shares account:
42,000 shares x $0 = $0
Therefore, the balance in the Common Shares account after the stock dividend would be equal to the market value of the shares, which is:
42,000 shares x $32 per share = $1,344,000
However, since the question asks for the Common Shares account balance, not the total equity balance, the unpaid portion of the stock dividend (which is equal to 2,000 shares x $32 per share x 5%) needs to be deducted from the total balance before calculating the Common Shares account balance:
2,000 shares x $32 per share x 5% = $3,200
$1,344,000 - $3,200 = $1,340,800
Therefore, the balance in the Common Shares account after the stock dividend would be $1,564,000 ($1,340,800 in Common Shares + $223,200 in paid-in capital from the stock dividend).

On June 30, 2020, When Wenn Inc If a 5% Stock Dividend Were Declared and Distributed, the at