Gordon Corporation reported the following equity section on its current balance sheet. The common stock is currently selling for $11.50 per share. 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.  What would be the total stockholders' equity after a 10% common stock dividend?

Quizplus · Accepted Answer

To calculate the total stockholders' equity after a 10% common stock dividend, we need to first determine the total number of outstanding shares.

Total Common Stock = Common Stock Par Value * Number of Shares
Total Common Stock = $50 * 8,000 = $400,000

Since the common stock dividend is 10%, the number of additional shares issued would be:

Additional Shares = Number of Shares * Dividend Rate
Additional Shares = 8,000 * 0.1 = 800

The new total number of shares outstanding would be:

New Total Shares = Number of Shares + Additional Shares
New Total Shares = 8,000 + 800 = 8,800

The new par value of the common stock would remain the same at $50 per share, but the total common stock would increase to:

New Total Common Stock = Common Stock Par Value * New Total Shares
New Total Common Stock = $50 * 8,800 = $440,000

Therefore, the total stockholders' equity after a 10% common stock dividend would be:

Total Stockholders' Equity = Total Common Stock + Retained Earnings
Total Stockholders' Equity = $440,000 + $170,000 = $610,000

Therefore, the answer is C.

Gordon Corporation Reported the Following Equity Section on Its Current