Samuel's has 7,000 shares of stock outstanding with a par value of $1.00 per share and a market value of $12 per share. The balance sheet shows $7,000 in the common stock account,$58,000 in the capital in excess of par account,and $32,500 in the retained earnings account. The firm just announced a 50% (large) stock dividend. What is the market value per share after the dividend?

Question

Quizplus · Accepted Answer

After the stock dividend, the number of outstanding shares will increase to 10,500 (7,000 x 1.5). 
The total value of the stock will remain the same ($84,000 = 7,000 x $12), but it will now be distributed among more shares.
This means that the new market value per share will be $8.00 ($84,000 / 10,500 shares).

Samuel's Has 7,000 Shares of Stock Outstanding with a Par