18 Stock Dividends The shareholder equity accounts for Hexagon International are shown here:

£

Ordinary shares (£1 par value) 10,000 Capital surplus 180,000 Retained earnings 586,500 Total owners’ equity 776,500

(a) If Hexagon shares currently sell for £25 per share and a 10 per cent stock dividend is declared, how many new shares will be distributed? Show how the equity accounts would change.

(b) If Hexagon declared a 25 per cent stock dividend, how would the accounts change?