Stock Dividends
The Stockholders' Equity category of Goaty Inc.'s balance sheet as of January 1, 2016, appeared as follows:
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Common stock, $10 par, 49,000 shares
issued and outstanding
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$490,000
|
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Additional paid-in capital
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100,000
|
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Retained earnings
|
400,000
|
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Total stockholders' equity
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$990,000
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The following transactions occurred during 2016:
Declared a 10% stock dividend to common stockholders on January 15. At the time of the dividend, the common stock was selling for $30 per share. The stock dividend was to be issued to stockholders on January 30, 2016.
Distributed the stock dividend to the stockholders on January 30, 2016.
Required:
1. Record the 2016 events. Indicate the effect on financial statement items by selecting "-" for decrease (or negative effect), "+" for increase (or positive effect) and "NE" for No Entry (or no effect) on the financial statement.
2. Develop the Stockholders' Equity category of Goaty Inc.'s balance sheet as of January 31, 2016, after the stock dividend was issued.
What effect did those transactions have on total stockholders' equity?
These transactions (A. increase, B. decrease, C. did not change) total stockholders' equity. They reclassified some equity from the (A. retained earnings, B. Contributed Capital) category to the (A. retained earnings, B. Contributed Capital) category.