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Common stock dividend

Eagle Industries reported the following stockholder's equity:

Paid in Capital:
Preferred stock, $50 par value, 30,000 shares authorized,
7,500 shares issued, redemption value, $53.50 $375,000

Paid in capital in excess of par value-preferred 18,750
Common stock, $1 par value, 100,000 shares authorized,
85,000 shares issued 85,000

Paid-in capital in excess of par value-common 472,500

Total paid in capital $951,250
Retained earnings 218,500
Total stockholder's equity $1,169,750

Required: a. The board of directors declared a 10% common stock dividend when the market price of the stock was $9 per share. Prepare the necessary journal entry to record the common stock dividend. b. What effect (increase or decrease and by how much $) did the distribution of the common stock dividend have on: 1. total assets, 2. total liabilities, 3. paid-in capital and 4. total stockholder's equity.

I am not sure what the entry is so I can't go to part B.

Solution Preview

The total number of common shares outstanding are 85,000. A 10% common stock dividend is declared. The number of new shares to be issued is 85,000X10%=8,500. The market price is $9 so the total value of the new shares is 8,500X9=76,500. This is ...

Solution Summary

The solution explains the journal entry for common stock dividend and its impact on the balance sheet.