Gordon Corporation reported the following equity section on its current balance sheet. The common stock is currently selling for $11.50 per share.
$$\begin{array} { | l | r | }
\hline\text { Common stock, } \$ 5 \text { par, } 100,000 \text { shares authorized, } 40,000 \text { shares } &\
\text { issued } & \$ 200,000 \
\hline \text { Paid in capital in excess of par-common } & 120,000 \
\hline \text { Retained earnings } & \underline { 290,000 } \
\hline \text { Total stockholders' equity } & \$ \underline { 610,000 }\
\hline
\end{array}$$
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What would be the Total stockholders' equity after a 10% common stock dividend?

Question

Gordon Corporation reported the following equity section on its current balance sheet. The common stock is currently selling for $11.50 per share.
$$\begin{array} { | l | r | } 
\hline\text { Common stock, } \$ 5 \text { par, } 100,000 \text { shares authorized, } 40,000 \text { shares } &\
\text { issued } &  \$ 200,000 \ 
\hline \text { Paid in capital in excess of par-common } & 120,000 \
\hline \text { Retained earnings } & \underline { 290,000 } \
\hline \text { Total stockholders' equity } & \$ \underline { 610,000 }\
\hline
\end{array}$$
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What would be the Total stockholders' equity after a 10% common stock dividend?

Quizplus · Accepted Answer

The total common stock outstanding is:
($10 par value x 50,000 shares) = $500,000

A 10% stock dividend means the company will issue 10% more shares:

10% x 50,000 shares = 5,000 shares

The additional common stock issued will be:
5,000 shares x $10 par value = $50,000

The market price per share is not relevant in this calculation.

Total stockholders' equity after the stock dividend will be:
Common stock: $500,000 + $50,000 = $550,000
Additional paid-in capital: $140,000
Retained earnings: $140,000
Total stockholders' equity: $830,000

Therefore, the correct answer is C.

Gordon Corporation Reported the Following Equity Section on Its Current