On December 31, 2013, the stockholders' equity section of the balance sheet of R & B Corporation reflected the following:
Common stock (par $10; authorized 60,000 shares, outstanding 25,000 shares) ..$250,000
Additional paid-in capital ................................................................... 12,000
Retained earnings ............................................................................ 75,000
On February 1, 2014, the board of directors declared a 12 percent stock dividend to be issued
April 30, 2014. The market value of the stock on February 1, 2014, was $18 per share.
Required:
1. For comparative purposes, prepare the stockholders' equity section of the balance sheet
(a) Immediately before the stock dividend and (b) immediately after the stock dividend.
2. Explain the effects of this stock dividend on the assets, liabilities, and stockholders' equity.
3. How would your answers to requirements 1 and 2 change if the stock dividend were 100%?