Elite Electrical has 380,000 shares of $4-par common stock outstanding. They have declared a 5% stock dividend. The current market price of the common stock is $7.50/share. The amount that will be credited to common stock on the date of declaration is:

Question

Quizplus · Accepted Answer

The amount that will be credited to common stock on the date of declaration is the market value of the shares issued as a stock dividend. In this case, the market value of the shares issued is 380,000 shares * $7.50/share = $2,850,000. The amount that will be credited to common stock is therefore $2,850,000 - $380,000 = $2,470,000.

Elite Electrical Has 380,000 Shares of $4-Par Common Stock Outstanding