Ch18 A5_Correct

Ch18 A5_Correct - Retained earnings 22,000,000 Common...

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Problem A5 (Accounting for a Stock Dividend) in Chapter 18: The Book Solution (Incorrect) A5. Paid-in capital ($0.50 par value, 10,100,000) $5,500,000 Capital contributed in excess of par value 16,300,000 Retained earnings 56,200,000 Common stockholders’ equity $78,000,000 Correct Solution A5. Paid-in capital ($0.50 par value, 11,000,000) $5,500,000 Capital contributed in excess of par value 50,500,000
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Unformatted text preview: Retained earnings 22,000,000 Common stockholders equity $78,000,000 10,000,000 * 10% = 1,000,000 new shares to be distributed 1,000,000 * $38 = $38,000,000 fair market value of new shares 1,000,000 * $0.50 = $500,000 increase to paid in capital ($38,000,000 $500,000) = $37,500,000 increase to capital in excess of par $60,000,000 - $38,000,000 = $22,000,000 retained earnings...
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