Use the following information to answer the following question(s).
Your firm is planning to pay a 15% share dividend.The market price for the share has been $84.The table below presents the equity portion of your firm's balance sheet before the dividend.
Common share

-Which of the following would result from payment of the share dividend?
A)Total equity would remain at $50,000,000.
B)Total equity would increase to $57,500,000.
C)Total equity would decrease to $43,478,261.
D)The effect on the equity account would depend on the market's reaction to the dividend.

Question

Use the following information to answer the following question(s).
Your firm is planning to pay a 15% share dividend.The market price for the share has been $84.The table below presents the equity portion of your firm's balance sheet before the dividend.
Common share
 
-Which of the following would result from payment of the share dividend?
A)Total equity would remain at $50,000,000. 
B)Total equity would increase to $57,500,000. 
C)Total equity would decrease to $43,478,261. 
D)The effect on the equity account would depend on the market's reaction to the dividend.

Quizplus · Accepted Answer

Paying a share dividend redistributes the equity within the shareholders' equity section of the balance sheet but does not change the total amount of equity. It reallocates part of the retained earnings to the common stock account but the total equity remains the same.

Use the Following Information to Answer the Following Question(s)