CBA Inc. has 400,000 shares outstanding with a $5 par value. The shares were issued for $12. The stock is currently selling for $34. CBA has $5,000,000 in retained earnings and has declared a stock dividend that will increase the number of outstanding shares by 6%. What will be the "capital in excess of par account" after the stock dividend?
A) $7,685,000
B) $2,685,000
C) $3,496,000
D) $2,385,000

Question

Quizplus · Accepted Answer

Beginning capital in excess of par account (400,000 shares × [$12 − $5]) = $2,800,000
Additional capital in excess of par (400,000 × 0.06) × ($34 − $5) = $696,000
Ending capital in excess of par account $3,496,000

CBA Inc Has 400,000 Shares Outstanding with a $5 Par Value