The company with the common equity accounts shown here has d

The company with the common equity accounts shown here has declared a 15 percent stock dividend when the market value of its stock is $43 per share Common stock ($1 par value) Capital surplus Retained earnings 385,000 846,000 3,720,800 $4,951.800 Total owners\' equity What would be the number of shares outstanding, after the distribution of the stock dividend? New shares outstanding What would the equity accounts be after the stock dividend? Common stock Capital surplus Retained earnings Total owners equity

Solution

A stock dividend is considered to be small if the new shares being issued are less than20-25% of the total number of shares outstanding prior to the stock dividend. Accounting entry for a small stock dividend is below:

Number of shares issued = 385,000 * 15%= 57,750

Par value of shares issued = 57,750 * 1 = 57,750

Capital surplus of shares issued = 57,750 * (43-1) = 24,83,250

Entry:

Total number of shares outstanding after the dividend:

Equity accounts after stock dividend:

*Hope the above explanation helps, please comment if further explanation is required. Your rating is appreciated*

Particulars	Debit	Credit
Retained earnings	24,83,250
Common stock		57,750
Capital surplus		24,25,500
[Being stock dividend issued at a market price of $43]