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Brimstone Tire Company: The Effect of a Stock Dividend

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Q12: The stockholders' equity portion of Brimstone Tire Company follows:

Common Stock (2.0 million shares at $10 par) $20,000,000
Capital in excess of par 17,000,000
Retained earnings 33,000,000
$70,000,000

The current market value of Brimstone's stock is $20. Show what the balance sheet will look like (comparison to above) if Brimstone declares a 10% stock dividend.

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Solution Summary

For your review, I have attached a formatted MS Excel spreadsheet which illustrates the impact of the declared 10% stock dividend on the retained earnings statement of the Brimstone Tire Company.

$2.19