Gilligan Corporation Was Established on February 15,Year 1

question 49

Multiple Choice

Gilligan Corporation was established on February 15,Year 1.Gilligan is authorized to issue 500,000 shares of $6.00 par value common stock.As of December 31,Year 3,Gilligan's stockholders' equity accounts report the following balances:
At the end of Year 3,Gilligan decides to issue a 5% stock dividend.At the time of issue,the market price of the stock was $22 per share.
-What is the amount of retained earnings that will be transferred to paid-in capital as a result of the stock dividend issued by Gilligan Corporation?

• A)$60,500
• B)$16,500
• C)$44,000
• D)$108,500

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Definitions:

Warrant Attached

An option issued by a company that gives the holder the right to purchase the company’s stock at a specific price before expiration.

Ex-rights

Denotes a security that is trading without the right to receive the most recently announced rights offering.

Additional Paid-in Capital

The amount of money investors have paid to a company above and beyond the par value of the shares they have purchased.

Cumulative Preferred Stock

A type of preferred stock where dividends accumulate if not paid in any given year, ensuring that dividends must be paid out to preferred stockholders before common stockholders receive any.