MNO declared a stock dividend when it had 40,000 shares outstanding.After issuing the dividend,7,200 additional shares and 4,000 fractional share rights were outstanding.If it required five fractional share rights to acquire a new share,this dividend must have been a:

Question

Quizplus · Accepted Answer

To determine the percentage of the stock dividend, we need to find out how many shares were issued as a result of the dividend. The 4,000 fractional share rights would be enough to purchase 800 additional shares (4,000/5), making a total of 40,000 + 7,200 + 800 = 48,000 shares outstanding after the dividend. The number of shares issued is 48,000 - 40,000 = 8,000. Therefore, the stock dividend is 8,000/40,000 = 20%. So, the correct choice is (D) 20 percent stock dividend.

MNO Declared a Stock Dividend When It Had 40,000 Shares