The stockholders\' equity section of Jun Company\'s balance sheet as of April 1

Question

The stockholders' equity section of Jun Company's balance sheet as of April 1 follows. On April 2, Jun declares and distributes a 10% stock dividend. The stock's per share market value on April 2 is $15 (prior to the dividend). Common stock $5 par value, 565,000 shares authorized, 295,000 shares issued and outstanding Paid-in capital in excess of par value, common stock Retained earnings Total stockholders' equity $1,475,000 680,000 928,000 $3,083,000 Prepare the stockholders' equity section immediately after the stock dividend. JUN COMPANY Stockholders' Equity April 2 (after stock dividend) Total paid-in capital Total stockholders' equity

Explanation / Answer

Amount of stock dividend = % stock dividend * Market price per share * Number of total shares outstanding

= 10% * $15 * 295000 = $442500

The entry for issue of stock dividend would be:

Retained Earnings Dr $442500

To Common stock (29500*$5) $147500

To Paid in capital in excess of par $295000

The stockholders equity section immediately after stock dividend would be:

Particulars Amount ($) Common stock -$5par value, 565000 authorized , 324500 shares issued and outstanding         16,22,500 Paid in capital in excess of par            9,75,000 Retained Earnings            4,85,500 Total Stockholders' Equity      30,83,000

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