Lawrenceville Co.reported the following:
Common stock,$3 par,10,000 shares authorized,5,000 shares issued and outstanding

What is the effect of a 10% stock dividend if the market price of the common stock is $30 per share when the dividend is declared?

Question

Lawrenceville Co.reported the following: ​
Common stock,$3 par,10,000 shares authorized,5,000 shares issued and outstanding
​
What is the effect of a 10% stock dividend if the market price of the common stock is $30 per share when the dividend is declared?

Quizplus · Accepted Answer

A 10% stock dividend means that the company will issue additional shares of stock equal to 10% of the shares already outstanding. In this case, 500 additional shares (10% of 5,000) will be issued. Since the market price of the stock is $30 per share, the total value of the dividend is $15,000 (500 shares x $30 per share). This value comes from the retained earnings account and is transferred to the contributed capital accounts, increasing the total contributed capital by $15,000. There is no effect on cash or additional paid-in capital accounts.

Lawrenceville Co.reported the Following: ​

Lawrenceville Co.reported the Following: