The stockholders\' equity section o to the dividend) Jun Company\'s balance shee

Question

The stockholders' equity section o to the dividend) Jun Company's balance sheet as o April 1 follows on April 2 Jun de ares and distributes a o stock dividend The stock's per share market alue on April s 5 pro Common stock-S5 par value, 485,000 shares authorized, 255,000 shares issued and outstanding Paid-in capital in excess of par value, common stock Retained earnings Total stockholders' equity $1,275,000 600,000 888,000 S2,763,000 Prepare the stockholders' equity section immediately after the stock dividend. JUN COMPANY Stockholders' Equity April 2 (after stock dividend) Common stock S 1,402,500 Paid-in capital in excess of par value, common stock Total paid-in capital Retained earnings Total stockholders' equity 1,402,500 S 1,402,500

Explanation / Answer

Stockholder equity section immediately after the stock dividend is as prepared below:

Total dividend distributed is 255,000 shares *10% = 25,500 shares

Now par values of these shares is 25,500*5 = 127,500 (Common stock will increase)

Market value is $10 so 25,500*5= 127,500 (Additional paid in capital will increase)

and Retained earning will decrease by 25,500*10 = 255,000

Stockholders equity will be:

Jun Corporation Stockholders Equity April 2 (after stock dividend) Common Stock 1,402,500 Paid in Capital in excess of Par-Common stock 727,500 Total paid in capital 2,130,000 Retained earnings 633,000 Total stockholders equity 2,763,000

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