On August 31, 2010 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 100% stock dividend.

What is the total amount in the Common Stock account immediately after the stock dividend?

Question

On August 31, 2010 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 100% stock dividend.

What is the total amount in the Common Stock account immediately after the stock dividend?

Quizplus · Accepted Answer

A 100% stock dividend means that the number of shares outstanding will double. Therefore, after the dividend, Victory Corporation will have 40,000 shares outstanding (20,000 x 2). The par value of the stock remains the same, so the total Common Stock account will be $1,040,000 ($20 par x 40,000 shares). Adding this to the Additional Paid-in Capital account already on the balance sheet gives a total Common Stockholders' Equity of $1,572,000 ($1,040,000 + $532,000).

On August 31, 2010 Victory Corporation's Common Stock Is Priced