Superstar Corporation reported the following equity section on its current balance sheet.The common stock is currently selling for $12.00 per share.

What would be the total stockholders' equity after a 15% common stock dividend?

Question

Superstar Corporation reported the following equity section on its current balance sheet.The common stock is currently selling for $12.00 per share.

What would be the total stockholders' equity after a 15% common stock dividend?

Quizplus · Accepted Answer

First, we need to calculate the number of shares outstanding: 
Common stock = $550,000 / $10 = 55,000 shares

A 15% common stock dividend means that the company will issue 15% more shares: 
15% of 55,000 shares = 8,250 shares

The par value of the common stock is $10 per share, so the total increase in value is: 
8,250 shares x $10 par value = $82,500

The total stockholders' equity after the dividend is: 
Common stock = 55,000 + 8,250 = 63,250 shares 
Paid-in capital in excess of par value = $550,000 
Retained earnings = $375,000 
Total stockholders' equity = (63,250 x $12) + $550,000 + $375,000 = $1,007,000.

Therefore, the correct answer is C.

Superstar Corporation Reported the Following Equity Section on Its Current