Heintz Corp. has just declared a 10% stock dividend. The company's pre-stock dividend common stockholders' equity was as follows:
If the common stock of Heintz was selling at $32 a share prior to the stock dividend, what will the retained earnings be after the stock dividend is distributed?
A) $ 65,500,000
B) $118,500,000
C) $ 66,000,000
D) $ 97,500,000

Question

Heintz Corp. has just declared a 10% stock dividend. The company's pre-stock dividend common stockholders' equity was as follows: 
If the common stock of Heintz was selling at $32 a share prior to the stock dividend, what will the retained earnings be after the stock dividend is distributed?
A) $ 65,500,000 
B) $118,500,000 
C) $ 66,000,000 
D) $ 97,500,000

Quizplus · Accepted Answer

Solution:
New shares = 10,000,000(0.10) = 1,000,000
R.E. = $97,500,000 - $32(1,000,000) = $65,500,000