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7 January, 07:25

The stockholders' equity section of Pretzer Corporation consists of common stock ($10 par) $2,650,000 and retained earnings $532,000. A 10% stock dividend (26,500 shares) is declared when the market price per share is $14. Show the before-and-after effects of the dividend on the following.

(a) The components of stockholders' equity. (b) Shares outstanding. (c) Par value per share.

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  1. 7 January, 07:45
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    A. $2,650,000 $3,312,500

    B.$532,000 $291,500

    C.$10 $10

    Explanation:

    Before Dividend After Dividend

    (a) Stockholders' equity

    Paid-in capital

    Common stock, $10 par

    $2,650,000 $2,915,000

    In excess of par value $106,000

    Total paid-in capital

    $2,650,000 $3,021,000

    Retained earnings

    $532,000 $291,500

    Total stockholders' equity

    $3,182,000 $3,312,500

    (b) Outstanding shares

    $265,000 $291,500

    (c) Par value per share

    $10 $10

    10*$26,500=$265,000

    $2,650,000+$265,000=$2,915,000

    $14*$26,500=$371,000-265,000

    =$106,000

    $265,000+$26,500=$291,500
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