Rockmont Corporation decides to issue a 15% stock dividend on 20,000 outstanding shares of $10 stated value common stock. The distribution is made at the time the market value of the stock is $50 a share. How will the entry to record this transaction affect the company's equity accounts?

Question

Quizplus · Accepted Answer

20,000 shares x 15% = 3,000 shares; Common stock is increased by $30,000 (3,000 shares x $10 stated value); Paid-in Excess is increased by $120,000 (3,000 shares x $40 diff. btw. market and stated value); Retained earnings is decreased by the total value of the stock dividend ($30,000 + $120,000).

Rockmont Corporation Decides to Issue a 15% Stock Dividend on 20,000