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.
Answer:
1.
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 |
2.
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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