Randall's, Inc. has 20,000 shares of stock outstanding with a par value of $1.00 per share. The market value is $12 per share. The balance sheet shows $42,000 in the capital in excess of par
Account, $20,000 in the common stock account and $50,500 in the retained earnings account. The
ﬁrm just announced a 5 percent (small) stock dividend. What is the change in the balance in the
Capital in excess of par account after the dividend?

Question

Quizplus · Accepted Answer

The change in the capital in excess of par account is calculated by multiplying the number of new shares issued by the difference between the market value and the par value. The firm issues 1,000 new shares (5% of 20,000). The market value is $12, and the par value is $1, so the difference is $11. Therefore, the change is 1,000 shares * $11 = $11,000.