On March 1, 2013, Parkinson Company originally issued 10,000 shares of common stock at $4.00 per share. The stock had a par value of $0.01 per share. On March 1, 2012, Parkinson distributed a 12% stock dividend; the market price at that time had dropped to $3.75 per share. Parkinson must record a loss of $300.

Question

Quizplus · Accepted Answer

Parkinson Company would not record a loss for the stock dividend. Instead, the value of the stock dividend would be recorded as a reduction of retained earnings and an increase in common stock and additional paid-in capital. The decrease in market price would only impact the value of the stock dividend, not result in a loss for the company.

On March 1, 2013, Parkinson Company Originally Issued 10,000 Shares