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 $10 (prior to the dividend) Common stock-$5 par value, 495,000 shares authorized, 260,000 shares issued and outstanding $1,300,006 Paid-in capital in excess of par value, common stock 610,000 893,000 $2,803,000 Retained earnings Total stockholders' equity Prepare the stockholders' equity section immediately after the stock dividend Answer is complete but not entirely correct. JUN COMPANY Stockholders' Equity April 2 (after stock dividend) Common stock s 1,300,000 Paid-in capital in excess of par value, common610,000 stock Total paid-in capital Retained earnings Total stockholders' equity 1,910,000 893,000 $ 2,803,000

Answer 1

The required answer is as following

Total Common Shares before stock dividend = 260000

Stock Dividend = 10%of 260000 = 26000 Shares

Par Value of Share = $5

Market Value of Share = $10

Paid in capital in excess of par value = $10-$5

Value of Stock Dividend at Par = 26000*$5 = $130000

Paid-in capital in excess of par value = 26000*$5 = $130000

New Balance of Common Stock = $1300000+$130000 =$1430000

New balance of Paid-in capital in excess of par value,common stock = $610000+$130000 = $740000

New Balance of Retained earnings = $893000-$130000-$130000 =$633000

JUN COMPANY
Stockholders' Equity
April 2 (after stock dividend)
Common Stock	$          1,430,000
Paid-in capital in excess of par value,common stock	$             740,000
Total Paid-in capital	$          2,170,000
Retained Earnings	$             633,000
Total stockholder' equity	$          2,803,000

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