Question

Star inc has 500,000 $1 par common shares outstanding, currently valued at $25. if the company issues a 15% stock dividend, what will be the effect of the equity section of the balance sheet? What about a 40% stock dividend?

Answer 1

If Star inc has 500,000 $1 par common shares outstanding, currently valued at $25 and if the company issues a 15% stock dividend, then the effect of the equity section of the balance sheet will be: 500,000*$1*0.15 = $75,000. If there is a 40% stock dividend, then the effect of the equity section of the balance sheet will be: 500,000*$1*0.4 = $200,000.