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

First, we need to calculate the amount of common stock dividend to be distributed:

Common stock dividend = 10% of 100,000 shares x $5 par value per share = $50,000

Then, we need to increase the common stock and paid-in capital in excess of par value by the amount of the dividend:

Common stock = 100,000 shares x $5 par value per share + $50,000 = $550,000
Paid-in capital in excess of par value = $350,000 + $50,000 = $400,000

Finally, we add the new common stock and paid-in capital in excess of par value to the retained earnings and preferred stock to get the total stockholders' equity:

Total stockholders' equity = $550,000 + $400,000 + $200,000 + $60,000 = $1,210,000

Therefore, the correct answer is C, $610,000.

Gordon Corporation Reported the Following Equity Section on Its Current