Analyze and record stock dividend transactions.
At December 31, 2007, Robby 's Shoe Company had 200,000 shares of $5 par common stock issued and outstanding . The retained earnings balance was $165,000. On January 15, 2008, Robby's issued a 3% stock dividend to its common shareholders. At the time of the dividend, the market value of the stock was $20 per share.
Required
a. How would the stock dividend be shown in the accounting equation?
b. How many shares of stock are outstanding after the stock dividend?
c. If you owned 5% of the outstanding common stock of Robby's Shoe Company before the stock dividend, what is your percentage ownership after the stock dividend?