The stockholders’ equity section of Catalina Company’s balance sheet as of April

Question

The stockholders’ equity section of Catalina Company’s balance sheet as of April 1 follows. On April 2, Catalina declares and distributes a 10% stock dividend. The stock’s per share market value on April 2 is $25. Prepare the stockholders’ equity section immediately after the stock dividend.

Common stock—$5 par value, 375,000 shares
authorized, 150,000 shares issued and outstanding . . . . . . . . . . . $ 750,000
Contributed capital in excess of par value, common stock . . . . . . . 352,500
Total contributed capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,102,500
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 633,000
Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,735,500

Explanation / Answer

XX-XX-XX Retained Earnings Dr 375000 Common Stock Cr 75000 Paid in Capital in Excess of Par Cr 300,000 (To record issuance of a 10% stock dividend (150,000 shares X 10% X $25 per share market price) Thus due to stock dividend, share sissues =10%*150000 = 15000 Par value is $5. SO common stock will increase by $5*15000 = 75000 Capital in excess of par = (25-5)*15000 = 300,000 Stockholders’ equity section on 2 Apr: Common stock—$5 par value, 375,000 shares authorized, 165,000 shares issued and outstanding . . . . . . . . . . . $ 825,000 Contributed capital in excess of par value, common stock . . . . . . $ 652,500 Total contributed capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,477,500 Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 258,000 Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,735,500

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