Wilson Company is authorized to issue 1,000,000 shares of $10 par value common stock. By March...
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Wilson Company is authorized to issue 1,000,000 shares of $10 par value common stock. By March 15, 2016, the company had issued 200,000 shares at $34 per share. On March 15, 2016, the company declared a 10% stock dividend when the market price was $40 per share.
What amount is transferred from retained earnings to paid-in capital as a result of the stock dividend?A. $ 200,000
B. $2,400,000
C. $ 800,000
D. $ 600,000
Homework Answers
Par value = $10 per share
Number of common shares outstanding = 200,000
On March 15, 2016, the company declared a 10% stock dividend when the market price was $40 per share.
Current market value of 1 common stock = $40
Stock dividend declared = 10%
Hence, number of shares to be issued = 200,000 x 10%
= 20,000
Hence, amount to be debited to retained earnings = 20,000 x 40
= $800,000
Amount to be transferred from retained earnings to paid-in capital as a result of the stock dividend = $800,000
Correct option is (C)
Kindly comment if you need further assistance. Thanks
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