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Stock Dividends

Stock Dividends The owner's equity accounts for Hexagon International are shown here:
Common stock ($1 par value) $10,000
Capital surplus $ 180,000
Retained earnings $ 586,500

Total owner's equity $ 776,500

a. If Hexagon stock currently sells for $25 per share and a 10% stock dividend is declared, how many new shares will be distributed? Show how the equity accounts would change.
b. If Hexagon declared a 25% stock dividend, how would the accounts change?

Solution Preview

a. If Hexagon stock currently sells for $25 per share and a 10% stock dividend is declared, how many new shares will be distributed? Show how the equity accounts would change.

The number of shares outstanding are 10,000 (common stock is $10,000 with $1 par value so number of shares = 10,000/1=10,000). A 10% stock dividend would mean 10,000X10%=1,000 shares are issued. ...

Solution Summary

The solution explains how to calculate the new shares to be issued under stock dividends and the impact on accounts.

$2.19