As of December 31, 2010, Hargrove Dynamics, Inc., had 75,000 shares of $5 par value common stock

Question:

As of December 31, 2010, Hargrove Dynamics, Inc., had 75,000 shares of $5 par value common stock issued and outstanding. The retained earnings balance was $265,000. On January 15, 2011, Hargrove Dynamics declared and issued an 8% stock dividend to its common shareholders. At the time of the dividend, the market value of the stock was $25 per share.

Requirements

1. Show how the stock dividend would affect the accounting equation.

2. How many shares of stock are outstanding after the stock dividend?

3. If you owned 7% of the outstanding common stock of Hargrove Dynamics, Inc., before the stock dividend, what is your percentage ownership after the stock dividend?

Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on... Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their... Par Value
Par value is the face value of a bond. Par value is important for a bond or fixed-income instrument because it determines its maturity value as well as the dollar value of coupon payments. The market price of a bond may be above or below par,...