Reference no: EM132419787

Columbia Paper has the following stockholders' equity account. The firm's common stock has a current market price of $30 per share.

Preferred stock                                                                                $100,000

Common stock (10,000 shares at $2 par)               20,000

Paid-in capital in excess of par                                                     280,000

Retained earnings                                                                             100,000

Total stockholders' equity                                                            $500,000

a. Show the effects on Columbia of a 5% stock dividend.

b. Show the effects of (1) a 10% and (2) a 20% stock dividend.

c. In light of your answers to parts aand b, discuss the effects of stock dividends on stockholders' equity.

a. The effects on Columbia of a 5% stock dividend.

Preferred stock                                                                                $100,000

Common stock (10,500 shares at $2 par)               21,000

Paid-in capital in excess of par                                                     304,000

Retained earnings                                                                             85,000

Total stockholders' equity                                                            $500,000

How did they get 304,000 for the Paid In Capital, also, is 304,000 correct?