On July 1,20xx,Tobias Corporation had 20,000 shares of its $100 par value common stock outstanding.On July 2,20xx,Tobias declared a 15 percent stock dividend to be distributed on August 6,20xx,to shareholders of record on July 16,20xx.What amount of retained earnings should be transferred to contributed capital because of this dividend?

Question

Quizplus · Accepted Answer

Retained earnings should be transferred to contributed capital because of a stock dividend equal to the market value of the stock at the date of declaration multiplied by the number of dividend shares. Therefore, the market value of the stock at the date of declaration multiplied by the number of dividend shares is the amount of retained earnings that should be transferred to contributed capital.

On July 1,20xx,Tobias Corporation Had 20,000 Shares of Its $100