Free Flying Aviation (FFA) just declared a 20 percent stock dividend to be paid three weeks from

Question:

Free Flying Aviation (FFA) just declared a 20 percent stock dividend to be paid three weeks from today. Before the ‘‘payment’’ of the stock dividend, the equity section on FFA’s balance sheet appeared as follows:

Common stock (10,000 shares outstanding, $5 par value).................................. $ 50,000
Additional paid-in capital............................................................................................. 20,000
Retained earnings......................................................................................................... 30,000
Total common shareholders’ equity...................................................................... $100,000

The market value of FFA’s stock is $7.00 per share.

a. How many shares of stock does FFA need to ‘‘pay’’ for the stock dividend?
b. What will be the amount of FFA’s ‘‘additional paid-in capital’’ after the stock dividend is paid?
c. What will be the amount of retained earnings after the stock dividend is paid?

Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial... 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...