Question

Columbia Paper has the following stockholders’ equity account. The firm’s common stock has a current market price of $30 per share. Preferred stock $100,000 Common stock (10,000 shares at $2 par) 20,000 Paid-in capital in excess of par 280,000 Retained earnings 100,000 Total stockholders’ equity $500,000

a.) Show the effects on Columbia of a 5% stock dividend.

b.) Show the effects of (1) a 10% and (2) a 20% stock dividend.

c.) In light of your answers to parts a and b, discuss the effects of stock dividends on stockholders’ equity.

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