Analyze and record stock dividend transactions. (LO 4)

As of December 31, 2007, Chips Company had 100,000 shares of \(\$ 10\) par value common stock issued and outstanding. The retained earnings balance was \(\$ 125,000\). On January 15, 2008, Chips Company issued a \(5 \%\) stock dividend to its common shareholders. At the time of the dividend, the market value of the stock was \(\$ 15\) per share.

\section*{Required}

a. Show how the stock dividend would affect the accounting equation.

b. How many shares of stock are outstanding after the stock dividend?

c. If you owned \(3 \%\) of the outstanding common stock of Chips Company before the stock dividend, what is your percentage ownership after the stock dividend?