The stockholders’ equity account for Paper Manufacturers is shown below. The firm’s common stock has a current market price of $20 per share.

a. How will the stockholders’ equity account change if Paper Manufacturers pays a 5% stock dividend?
b. How will the stockholders’ equity account change if Paper Manufacturers pays (1) a 10%, and (2) a 15% stock dividend?
c. What is the effect of a stock dividend on the stockholders’ equity?

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Preferred stock Common stock (120,000 shares at $4 par) Paid-in capital in excess of par Retained earnings Total stockholders' equity $ 100,000 480,000 1,920,000 360,000 $2,860,000