Gordon Corporation reported the following equity section on its current balance sheet. The common stock is currently selling for $11.50 per share.
$$\begin{array} { | l | r | }
\hline \begin{array} { l }
\text { Common stock, \$5 par, } 100,000 \text { shares } \
\text { authorized, } 40,000 \text { shares issued }
\end{array} & \$ 200,000 \
\hline \text { Paid in capital in excess of par - common } & 120,000 \
\hline \text { Retained earnings } & \underline { 290,000 } \
\hline \text { Total stockholders' equity } & \$ \underline { 610,000 } \
\hline
\end{array}$$ What would be the amount of the common stock account after the declaration of a 10% stock dividend?

Question

Gordon Corporation reported the following equity section on its current balance sheet. The common stock is currently selling for $11.50 per share.
$$\begin{array} { | l | r | } 
\hline \begin{array} { l } 
\text { Common stock, \$5 par, } 100,000 \text { shares } \
\text { authorized, } 40,000 \text { shares issued }
\end{array} & \$ 200,000 \
\hline \text { Paid in capital in excess of par - common } & 120,000 \
\hline \text { Retained earnings } & \underline { 290,000 } \
\hline \text { Total stockholders' equity } & \$ \underline { 610,000 } \
\hline
\end{array}$$ What would be the amount of the common stock account after the declaration of a 10% stock dividend?

Quizplus · Accepted Answer

A 10% stock dividend on 40,000 shares issued would result in 4,000 additional shares (10% of 40,000). Since the par value is $5 per share, the common stock account would increase by $20,000 (4,000 shares * $5), resulting in a new total of $220,000 ($200,000 + $20,000).

Gordon Corporation Reported the Following Equity Section on Its Current