The company with the common equity accounts shown here has declared a 10 percent stock dividend at

Question:

The company with the common equity accounts shown here has declared a 10 percent stock dividend at a time when the market value of its stock is $48 per share. What effects on the equity accounts will the distribution of the stock dividend have?

Common stock ($1 par value)................$ 425,000

Capital surplus........................................ 1,430,000

Retained earnings.................................. 3,250,000

Total owners’ equity............................ $5,105,000

Distribution
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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...