A corporation declared and issued a 15% stock dividend on October 1. The following information was available immediately prior to the dividend: $\begin{array}{lrr}
\text { Retained earnings } & \$ 750,000 \
\text { Shares issued and outstanding } & 60,000 \
\text { Market value per share } & \$ 15 \
\text { Par value per share } & \$ 5
\end{array}$

The amount that contributed capital will increase (decrease) as a result of recording this stock dividend is:
A) $(135,000).
B) $135,000.
C) $(45,000).
D) $45,000.
E) $0.

Question

A corporation declared and issued a 15% stock dividend on October 1. The following information was available immediately prior to the dividend: $\begin{array}{lrr}
\text { Retained earnings } & \$ 750,000 \
\text { Shares issued and outstanding } & 60,000 \
\text { Market value per share } & \$  15 \
\text { Par value per share } & \$  5
\end{array}$

The amount that contributed capital will increase (decrease) as a result of recording this stock dividend is:
A) $(135,000).
B) $135,000.
C) $(45,000).
D) $45,000.
E) $0.

Quizplus · Accepted Answer

The contributed capital increases by the market value of the stock dividend issued. The stock dividend is 15% of 60,000 shares, which is 9,000 shares. The market value per share is $15, so the increase in contributed capital is 9,000 shares * $15 = $135,000.

A Corporation Declared and Issued a 15% Stock Dividend on October