Question

Cody's Western Wear has 2,000 shares of $10 par value common stock outstanding. During the current year, the company distributed a 10% stock dividend. The market value of the stock at that time was $16 per share. Cody's total stockholders' equity should increase or decrease by

Answer 1

Answer choices are:

A. $0.
B. $1,200.
C. $2,000.
D. ($3,200)

Correct answer choice is:

D. ($3,200)

Explanation:

The company, from the above information provided, gave 10% stock dividend. Therefore, the number of shares would be changed from 2000 to 2200 which means there is an increase of $200,

Hence, the increase in shares equity would be 200 shares at the market value of $16

Thus,
Cody's total stockholders' equity = 200 × 16
                                                        = $ 3200