Elite Electrical has 350,000 shares of $3-par common stock outstanding.They have declared a 5% stock dividend.The current market price of the common stock is $7.50/share.The amount that will be debited to Retained Earnings on the date of declaration is:

Question

Quizplus · Accepted Answer

To calculate the amount that will be debited to Retained Earnings, we first need to determine the total value of the stock dividend.

5% of 350,000 shares is 17,500 additional shares that will be issued as part of the dividend.

To find the value of those shares, we multiply the number of shares by the current market price:

17,500 shares x $7.50 per share = $131,250

This $131,250 value will be debited to Retained Earnings on the date of declaration. Therefore, the correct answer is B) $131,250.

Elite Electrical Has 350,000 Shares of $3-Par Common Stock Outstanding