Chapter 11, Problem 12E

Analyzing Stock Dividends

On December 31, the stockholders’ equity section of the balance sheet of R & B Corporation reflected the following:

Common stock (par $10; authorized 60,000 shares, outstanding 25,000 shares)	$250,000
Additional paid-in capital	12,000
Retained earnings	75,000

On February 1 of the following year, a 12 percent stock dividend was issued. The market value of the stock on February 1 was $18 per share.

Required:

1. 1. For comparative purposes, prepare the stockholders’ equity section of the balance sheet (a) immediately before the stock dividend and (b) immediately after the stock dividend.

   TIP: Use two columns for the amounts in this requirement.

2. 2. How would your answer to requirement 1 change if the stock dividend were 100%?