Question

Murphy's, Inc., has 45,000 shares of stock outstanding with a par value of $1 per share. The market value is $10 per share. The balance sheet shows $70,500 in the capital in excess of par account, $45,000 in the common stock account, and $133,500 in the retained earnings account. The firm just announced a stock dividend of 12 percent. What will the balance in the capital in excess of par account be after the dividend?

Answer 1

Answer: $119100

Explanation:

The balance in the capital in excess of par account be after the dividend will be calculated thus:

Firstly, we'll calculate the change in capital in excess of par and this will be:

= Number of shares × dividend rate × (market value - par value)

= 45,000 × 12% × ($10 - $1)

= (45000 × 0.12) × $9

= 5400 × $9

= $48,600

Then, the balance in the capital in excess of par after the dividend will be:

= $70,500 + $48,600

= $119,100