Asked by Mindy Bounheuangvilay on May 16, 2024
Verified
Morgan's has 9,000 shares of stock outstanding with a par value of $1.00 per share and a market value of $9 per share. The balance sheet shows $9,000 in the common stock account, $21,000 in the capital in excess of par account, and $40,500 in the retained earnings account. The firm just announced a 100 percent (large) stock dividend. What is the value of the common stock account after the dividend?
A) $9,000
B) $11,000
C) $13,500
D) $16,500
E) $18,000
Stock Dividend
A dividend payment made in the form of additional shares of the paying company's stock rather than cash.
Common Stock Account
An equity account that represents the ownership interest held by common shareholders in a corporation, including its value and dividends.
Capital in Excess of Par
The amount by which the proceeds from the issuance of shares exceed the par value of the shares issued; it's often referred to as additional paid-in capital.
- Examine the consequences of stock splits and stock dividends on the equity and per-share prices of a company.
- Investigate the influence of dividend distribution choices on retained profits and equity of shareholders.
Verified Answer
LG
Leslie GuzmanMay 18, 2024
Final Answer :
E
Explanation :
A 100 percent stock dividend means the number of shares will double, so the new total shares will be 18,000. Since the par value is $1.00 per share, the value of the common stock account after the dividend will be 18,000 shares * $1.00 per share = $18,000.
Learning Objectives
- Examine the consequences of stock splits and stock dividends on the equity and per-share prices of a company.
- Investigate the influence of dividend distribution choices on retained profits and equity of shareholders.