On January 1 Ecuyer Corporation had 1600000 shares of $10 par value common stock outstanding. On March 31 the company declared a 15% stock dividend. Market value of the stock was $15/share. As a result of this event

A) Ecuyer's Paid-in Capital in Excess of Par account increased $1200000.
B) Ecuyer's total stockholders' equity was unaffected.
C) Ecuyer's Stock Dividends account increased $3600000.
D) All of these answer choices are correct.

Question

Laura Hernandez · Accepted Answer

Final Answer : D, Explanation :  A stock dividend increases the common stock and paid-in capital in excess of par accounts but does not affect total stockholders' equity. The stock dividend is calculated as 15% of 1,600,000 shares, which is 240,000 shares. The increase in common stock is 240,000 shares x $10 par value = $2,400,000. The increase in paid-in capital in excess of par is 240,000 shares x ($15 market value - $10 par value) = $1,200,000. The stock dividends account increases by 240,000 shares x $15 market value = $3,600,000. Thus, all statements are correct.

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