On June 30, Sharper Corporatio

On June 30, Sharper Corporation’s stockholders’ equity section ofits balance sheet appears as follows before any stock dividend orsplit. Sharper declares and immediately distributes a 50% stockdividend.

Common stock—$10 par value, 120,000 shares authorized, 52,000shares issued and outstanding $ 520,000
Paid-in capital in excess of par value, common stock 210,000
Retained earnings 665,000
Total stockholders’ equity $ 1,395,000

Exercise 13-6 Large stock dividend LO P2

Required:(1) Prepare the updated stockholders’ equity section after thedistribution is made.(2) Compute the number of shares outstanding after the distributionis made.



Number of shares outstanding before stock dividend = 52,000

Stock dividend = 50%

Number of shares issued in stock dividend = Number of sharesoutstanding before stock dividend x Stock dividend percentage

= 52,000 x 50%

= 26,000

In case of large stock dividend, par value of shares isconsidered.

After stock dividend, retained earnings will decrease by =Number of shares issued in stock dividend x Par value of 1share

= 26,000 x 10

= $260,000

After stock dividend, common stock will increase by = Number ofshares issued in stock dividend x Par value of 1 share

= 26,000 x 10

= $260,000

Common stock—$10 par value, 120,000 shares authorized, 78,000shares issued and outstanding $ 780,000
Paid-in capital in excess of par value, common stock 210,000
Retained earnings 405,000
Total stockholders’ equity $ 1,395,000


Number of shares outstanding after stock dividend = Number ofshares outstanding before stock dividend + Number of shares issuedin stock dividend

= 52,000 + 26,000

= 78,000

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