Question

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Gilligan Corporation was established on February 15, Year 1. Gilligan is authorized to issue 500,000 shares of $6.00 par value common stock. As of December 31, Year 3, Gilligan's stockholders' equity accounts report the following balances:

Common stock, $6 par, 500,000 shares authorized, 55,000 shares issued and outstanding	$	330,000
Paid-in capital in excess of par - Common		440,000
				$	770,000
Retained earnings					1,400,000
Total Stockholders’ Equity				$	2,170,000

At the end of Year 3, Gilligan decides to issue a 5% stock dividend. At the time of issue, the market price of the stock was $22 per share.

What is the amount of retained earnings that will be transferred to paid-in capital as a result of the stock dividend issued by Gilligan Corporation?

• $60,500

• $16,500

• $44,000

• $108,500

Answer 1

Amount of retained earnings transferred to paid-in capital	60500	=55000*5%*22
Option A $60,500 is correct