To determine the updated stockholders' equity after Sunland Corporation declares and distributes a 10% stock dividend, we need to follow several steps:
1. Determine the number of shares currently issued:
The common stock value is \[tex]$378,500 with a par value of \$[/tex]5 per share.
[tex]\[
\text{Number of shares} = \frac{\$378,500}{\$5} = 75,700 \text{ shares}
\][/tex]
2. Calculate the number of new shares for the 10% stock dividend:
[tex]\[
\text{New shares} = 75,700 \text{ shares} \times 10\% = 7,570 \text{ shares}
\][/tex]
3. Determine the total market value of the stock dividend:
Given that the market price per share is \[tex]$15:
\[
\text{Stock dividend value} = 7,570 \text{ shares} \times \$[/tex]15 = \[tex]$113,550
\]
4. Reduce retained earnings by the value of the stock dividend:
Retained earnings before the stock dividend are \$[/tex]159,000.
[tex]\[
\text{New retained earnings} = \$159,000 - \$113,550 = \$45,450
\][/tex]
5. Increase common stock by the par value of the new shares issued:
The par value is \[tex]$5 per share.
\[
\text{Increase in common stock} = 7,570 \text{ shares} \times \$[/tex]5 = \[tex]$37,850
\]
\[
\text{New common stock} = \$[/tex]378,500 + \[tex]$37,850 = \$[/tex]416,350
\]
6. Increase paid-in capital in excess of par:
The excess amount per share over the par value is:
[tex]\[
\$15 - \$5 = \$10 \text{ per share}
\][/tex]
For the new shares, the additional paid-in capital is:
[tex]\[
\text{Increase in paid-in capital} = 7,570 \text{ shares} \times \$10 = \$75,700
\][/tex]
[tex]\[
\text{New paid-in capital in excess of par} = \$24,000 + \$75,700 = \$99,700
\][/tex]
7. Calculate the new total stockholders' equity:
[tex]\[
\text{New total stockholders' equity} = \$416,350 + \$99,700 + \$45,450 = \$561,500
\][/tex]
The updated stockholders' equity after the distribution of the 10% stock dividend is as follows:
\begin{tabular}{lr}
Common stock, \[tex]$5 par value & \$[/tex]416,350 \\
Paid-in capital in excess of par-common stock & \[tex]$99,700 \\
Retained earnings & \$[/tex]45,450 \\
\hline Total stockholders' equity & \[tex]$561,500 \\
\hline
\end{tabular}
Here we can observe that even after the stock dividend, the total stockholders' equity remains unchanged at \$[/tex]561,500, while the individual components have been adjusted accordingly with the new shares issued and the decrease in retained earnings.
