Q9SE_2 - Horngren'S Financial And Managerial Accounting

Question

Question: Journalizing a small stock dividend

Element Water Sports has 13,000 shares of \(1 par value common stock outstanding. 

Element distributes a 5% stock dividend when the market value of its stock is \)15 per share.

Requirements

2. What is the overall effect of the stock dividend on Element’s total assets?

Step-by-Step Solution

Answer

Answer

No effect of stock dividend is traced on the total assets of the corporation.

Step 1: Basic Introduction

Total asset is the value owned by the corporation both for short and long period of time. Total assets include current and non-current assets of the corporation.

Step 2: The overall effect of the stock dividend on total assets

Stock dividends do not bring any changes in the total asset of the balance sheet but instead affect only the equity side by redistributing portion of the retained earnings to the common stock.