Bruno's has 7,000 shares outstanding with a par value of £1.00 per share and a market value of £12 per share.The statement of ﬁnancial position shows £7,000 in the ordinary equity account, £58,000
In the additional paid in capital account and £32,500 in the retained earnings account.The ﬁrm just
Announced a 50% (large) stock dividend.What is the value of the ordinary equity account after the
Dividend?

Question

Quizplus · Accepted Answer

First, we need to calculate the total number of shares outstanding after the stock dividend. A 50% stock dividend means that there will be an additional 50% of the current 7,000 shares outstanding, so:

7,000 x 0.5 = 3,500 additional shares

Total shares outstanding after the dividend:

7,000 + 3,500 = 10,500 shares

Next, we need to calculate the new par value of the shares:

Since the par value per share is £1.00, and there are now 10,500 shares outstanding, the new par value of the shares is:

10,500 x £1.00 = £10,500

Finally, we need to add the additional paid-in capital and retained earnings to the new par value to get the value of the ordinary equity account:

£10,500 + £58,000 + £32,500 = £101,000

Therefore, the value of the ordinary equity account after the dividend is £10,500.

Bruno's Has 7,000 Shares Outstanding with a Par Value of £1.00