On August 31,2013,Victory Corporation's common stock is priced at $30 per share before any stock dividend or split,and the stockholders' equity section of its balance sheet appears as follows.Assume that the company declares and immediately distributes a 15% stock dividend.
$\begin{array}{lr}
\text { Common stock }-\$ 7 \text { par value, } 95,000 \text { shares authorized, } 38,000 \text { shares }\
\text { issued and outstanding } & \$ 266,000 \
\text { Paid-in capital in excess of par value, common stock } & 100,000 \
\text { Retained earnings } & 366,000 \
\text { Total stockholders' equity } & \$ 732,000
\end{array}$

What is the total amount in the Retained Earnings account immediately after the stock dividend?

Question

On August 31,2013,Victory Corporation's common stock is priced at $30 per share before any stock dividend or split,and the stockholders' equity section of its balance sheet appears as follows.Assume that the company declares and immediately distributes a 15% stock dividend.
$\begin{array}{lr}
\text { Common stock }-\$ 7 \text { par value, } 95,000 \text { shares authorized, } 38,000 \text { shares }\
\text { issued and outstanding } & \$ 266,000 \
 \text { Paid-in capital in excess of par value, common stock } & 100,000 \
\text { Retained earnings } & 366,000 \
 \text { Total stockholders' equity } & \$ 732,000
\end{array}$

What is the total amount in the Retained Earnings account immediately after the stock dividend?

Quizplus · Accepted Answer

The stock dividend is 15% of 38,000 shares, which is 5,700 additional shares. The market price is $30, so the total value of the dividend is 5,700 shares x $30 = $171,000. This amount is deducted from Retained Earnings, reducing it from $366,000 to $195,000.

On August 31,2013,Victory Corporation's Common Stock Is Priced at $30