On October 1, Kosko Corporation\'s stockholders\' equity is as follows. Common s

Question

On October 1, Kosko Corporation's stockholders' equity is as follows.

Common stock, $7 par value $546,700
Paid-in capital in excess of par value 27,340
Retained earnings 156,870
Total stockholders' equity $730,910


On October 1, Kosko declares and distributes a 11% stock dividend when the market value of the stock is $14 per share.


Compute the par value per share (1) before the stock dividend and (2) after the stock dividend.
Before stock dividend $
After stock dividend $



Indicate the balances in the three stockholders' equity accounts after the stock dividend shares have been distributed.
Common stock $
Paid-in capital in excess of par value $
Retained earnings $

Explanation / Answer

Par value per share doesn't change; it is $7 per share before and after. There are 546,700/7= 78,100 shares outstanding so an 11% stock dividends adds .11*78,100= 8,591 shares. At $14 per share market value we have 8,591* 7= 60,137 add to common stock 8,591(14-7)= 60,137 add to paid in capital in excess of par. And a 60,137*2= 120,274 reduction in retained earnings. C/S 606,837 PIC in excess of par 87,477 R/E 36,596 Total 730,910

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