Question

Show computations & answers. # of dividend shares = (5), *.2) # of dividend shares = computation: 150,00 X.1) ) answer: 5, $ 10% stock dividend value (FMV = $25/share) (D, 20% stock dividend (FMV = $40/share) value $ Stockholders' Equity section of balance sheet Common Stock, $5 par value, 100,000 shares authorized, 50,000 shares issued and outstanding Paid-in capital in excess of par value, common stock Retained earnings Total stockholders' equity 250,000 120,000 450,000 820,000 5 $ 275 $20 $ 220, $25 $ 325,000 25 $ 820,000 55,00 shares $35 $40 25 $ 90,00 $ 470,000 $ 50,UDU $ 820,000 50.000 shares $ Common stock shares outstanding 50,000 # of dividend shares = (5000x (2) 3-50,00 50,000 2-for-1 stock split # of dividend shares = computation: (50,00 X 1) answer: 50,00 $ 100% stock dividend Stockholders' Equity section of balance sheet value (FMV = $30/share) Common Stock, $5 par value, 300,000 shares authorized, 50,000 shares issued and outstanding $ 250,000 45 $ 500, www Paid-in capital in excess of par value, common stock 120,000 $ 120,00 Retained earnings 750,000 $5 $ 500,000 Total stockholders' equity $ 1,120,000 V $ 1,120,000 Common stock shares outstanding 25,000 Two, shares Par Value $ 5 $ $ 250,oo 120, www 750 uur 1,120,000 100 shares SSO

I'm confused and don't understand this very well. Can someone please explain why we do the computations to arrive at these numbers? I know that this is easy math, I just don't understand it conceptually. Therefore, I don't know when to do what computations and why. Thanks

Answer 1

1)	Before	Value	10% stock dividend	After dividend	Calculation		Value	20% stock dividend	After dividend	Calculation
FMV			25					40
Dividend shares			5000		50000*10%			10000		50000*20%
Common Stock@$5 par	250000	5	25000	275000	5000*5		5	50000	300000	10000*5
Paid in Capital	120000	20	100000	220000	(5000*25)-25000		35	350000	470000	(10000*40)-50000
Retained Earnings	450000		-125000	325000				-400000	50000
Total SH Equity	820000			820000					820000
Shares outstanding	50000			55000					60000
2)	Before	Value	100% stock dividend	After dividend	Calculation		Value	2:1 stock split	After Split	Calculation
FMV			30					NA
Dividend/Split shares			50000		50000*100%			50000		(50000*2/1)-50000
Common Stock@$5 par	250000	5	250000	500000	50000*5		2.5	0	250000
Paid in Capital	120000	25	1250000	1370000	(50000*30)-250000			0	120000
Retained Earnings	750000		-1500000	-750000				0	750000
Total SH Equity	1120000			1120000					1120000
Shares outstanding	50000			100000					100000
Par Value	5			5					2.5