Stock dividend Fim Columbia Paper has the following stockhol

Stock dividend- Fim Columbia Paper has the following stockholders\' equity account. The firm\'s common stock has a current market price of $29 per share. Preferred stock Common stock (12,000 shares at $1 par) Paid-in capital in excess of par Retained earnings $110,000 12,000 336,000 110,000 $568,000 Total stockholders\' equity a. Show the effects on Columbia of a 20% stock dividend b. In light of your answers to part a, discuss the effects of stock dividend on stockholders\' equity a The preferred stock of Columbia after a 20% stock dividend is (Round to the nearest dollar.) The common stock of Columbia after a 20% stock dividend is $ (Round to the nearest dollar.) The paid-in-capital in excess of par of Columbia after a 20% stock dividend is SLI (Round to the nearest dollar ) The retained earnings of Columbia after a 20% stock dividend is $ (Round to the nearest dollar) The total stockholders equity of Columbia after a 20% stock dividend iss Round to the nearest dollar.) b. Which of the following statements about the effects of stock dividend on stockholders\' equity is false? (Select the best answer below.) O A. A stock dividend redistributes retained earnings into common stock and paid-in capital accounts. O B. A stock dividend does not cause a decrease in the overall stockholders\' equity account ° C. A stock dividend causes overall stockholders\' equity account to decrease D. A stock dividend increases paid-in capital

Solution

A) Preferred stock will not be affected by stock dividend as it is given to equity shareholders only. 110000.

A stock dividend is a dividend payment made in the form of additional shares rather than a cash payout.journal entry for stock bonus would be

Retained earning account DR (20% of 12000*29) 69600

To equity share capital(2400*1) 2400

To paid in capital in excess of par 67200

Common stock of Columbia after 20% stock dividend 12000+2400=14400

Paid in capital in excess of par after 20% stock dividend=336000+672006=403200

Retained earning of Columbia after 20% stock dividend 110000 69600 =40400

Total stock holder equity after 20% stock dividend(40400+403200+14400+11000) =568000.

B)

Option a is correct about stock dividend as it only redistribute the Retained earning into common stock N excess paid up capital as shown above in the question.

Option a is correct.