On October 1, Kosko Corporation\'sstockholders\' equity is as follows. Common st
ID: 2447309 • Letter: O
Question
On October 1, Kosko Corporation'sstockholders' equity is as follows.
Common stock, $5 parvalue
$400,000
Paid-in capital in excess of parvalue
25,000
Retained earnings
155,000
Totalstockholders' equity
$580,000
On October 1, Kosko declares anddistributes a 10% stock dividend when the market value of the stockis $15 per share.
Compute the book value pershare (1) before the stock dividend and (2) after the stockdividend. (Round answers to 2 decimalplaces.)
Before stockdividend =
After Stock dividend=
Indicate the balances in the threestockholders' equity accounts after the stock dividend shares havebeen distributed.
Common stock =
Paid-in capital in excess of parvalue =
Retained earnings =
Explanation / Answer
Assuming dividend is not required to be booked beofre the EOY,otherwise, prorate the outstanding shares for the year! Divide $400,000 by $5.00 to obtain outstanding shares beforedividend. Divide $580,000 by the number of shares found above to find bookvalue per share. Multiply number of shares outstanding by 1.1 to obtain total sharesoutstanding AFTER dividend. Book new shares at par, crediting Treasury Stock and RetainedEarnings. Transfer of market value or par value from retained earnings topaid-in capital. Par value per share is not changed.. Total parvalue is increased.
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