Stock Dividends The Stockholders’ Equity category of Worthy Company’s balance sheet as of January 1, 2010, appeared as follows:

Common stock, $10 par, 40,000 shares issued and outstanding $400,000 Additional paid-in capital 100,000 Retained earnings 400,000 Total stockholders’ equity $900,000 The following transactions occurred during 2010:

a. 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, 2010.

b. Distributed the stock dividend to the stockholders on January 30, 2010.

Required 1. Identify and analyze the effect of each transaction.

2. Develop the Stockholders’ Equity category of Worthy Company’s balance sheet as of January 31, 2010, after the stock dividend was issued. What effect did those transactions have on total stockholders’ equity?

AppendixLO1