Centurion Alarms recently declared a 10 percent stock dividend. Prior to the stock dividend, the equity section on Centurion's balance sheet was:

$\begin{array}{lr}
\text { Common stock ( } 100,000 \text { shares outstanding, \$1 par value) } & \$ 100,000 \
\text { Additional paid-in capital } & 60,000 \
\text { Retained earnings } & \underline{90,000} \
\text { Total common shareholders' equity } & \underline{\$ 250,000}
\end{array}$

Centurion's stock currently sells for $4 per share. After the stock dividend is paid, the amount in the Common stock account should be _______ and the amount in the Retained earnings account should be ______.

Question

Centurion Alarms recently declared a 10 percent stock dividend. Prior to the stock dividend, the equity section on Centurion's balance sheet was:

$\begin{array}{lr}
\text { Common stock ( } 100,000 \text { shares outstanding, \$1 par value) } & \$ 100,000 \
\text { Additional paid-in capital } & 60,000 \
\text { Retained earnings } & \underline{90,000} \
\text { Total common shareholders' equity } & \underline{\$ 250,000}
\end{array}$

Centurion's stock currently sells for $4 per share. After the stock dividend is paid, the amount in the Common stock account should be _______ and the amount in the Retained earnings account should be ______.

Quizplus · Accepted Answer

A 10 percent stock dividend on 100,000 shares results in an additional 10,000 shares being issued. With a $1 par value, the Common stock account increases by $10,000 (from $100,000 to $110,000). The market value of the dividend is $4 per share for 10,000 shares, totaling $40,000, which is deducted from Retained earnings, reducing it from $90,000 to $50,000.

Centurion Alarms Recently Declared a 10 Percent Stock Dividend Centurion's Stock Currently Sells for $4 Per Share