Stock Dividend Comparison

Although Oriole Company has enough retained earnings legally to declare a dividend, its working capital is low. The board of directors is considering a stock dividend instead of a cash dividend. The common stock is currently selling at $33 per share. The following is Oriole's current shareholders' equity:

Common stock, $10 par	$300,000
Additional paid-in capital on common stock	600,000
Total contributed capital	$900,000
Retained earnings	1,200,000
Total shareholders' equity	$2,100,000

Required:

1. Assuming a 15% stock dividend is declared and issued, prepare the shareholders' equity section immediately after the date of issuance.

Oriole Company
Stockholders' Equity
Common stock, $10 par	$fill in the blank c2c026fddfea029_1
Additional paid-in capital on common stock	fill in the blank c2c026fddfea029_2
Total contributed capital	$fill in the blank c2c026fddfea029_3
Retained earnings	fill in the blank c2c026fddfea029_4
Total shareholders' equity	$fill in the blank c2c026fddfea029_5

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2. Assuming, instead, that a 30% stock dividend is declared and issued, prepare the shareholders' equity section immediately after the date of issuance.

Oriole Company
Shareholders' Equity
Common stock, $10 par	$fill in the blank a5bb0a030033fe7_1
Additional paid-in capital on common stock	fill in the blank a5bb0a030033fe7_2
Total contributed capital	$fill in the blank a5bb0a030033fe7_3
Retained earnings	fill in the blank a5bb0a030033fe7_4
Total shareholders' equity	$fill in the blank a5bb0a030033fe7_5

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3. Retained earnings are reduced more by a small stock dividend than by a large stock dividend because a large stock dividend is computed based on par value .