Universe Co. issued 500,000 shares of common stock in the current year. Universe declared a 30% stock dividend. The market value was $50 per share, the par value was $10, and the average issue price was $30 per share. By what amount will Universe decrease shareholders' equity for the dividend?

Question

Crystal Duffy

Business

7 July, 02:22

Universe Co. issued 500,000 shares of common stock in the current year. Universe declared a 30% stock dividend. The market value was $50 per share, the par value was $10, and the average issue price was $30 per share. By what amount will Universe decrease shareholders' equity for the dividend?

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Answers (1)

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Valeria Poole · Answer 1

The amount of $0 will decrease the shareholders equity for the dividend.

Explanation:

Stock Dividend is the kind of dividend in which the payment of dividend done in the form of additional or extra shares instead of a cash payout.

So, when the stock dividend is declared, then the portion of the retained earnings is re - classified as the contributed capital.

Therefore, the net effect on the aggregate equity will be $0.