On December 31, 2015, the shareholders’ equity section of the statement of financial position of R & B Corporation reflected the following:
Common shares (no par value, authorized 60,000 shares,
outstanding 30,000 shares) ............... $ 360,000
Contributed surplus ............................12,000
Retained earnings ................... 175,000
Accumulated other comprehensive income .........28,000
On February 1, 2016, the board of directors declared a 10 percent stock dividend to be issued April 30, 2016. The market value per share was $ 18 on the declaration date.
Required:
1. For comparative purposes, prepare the shareholders’ equity section of the statement of financial position
(a) Before the stock dividend
(b) After the stock dividend.
2. Explain the effects of this stock dividend on the company’s assets, liabilities, and shareholders’ equity.