Stock Dividend Capitalization 3Ac90E

1. **State the problem:** Skywalker Corporation issued a 100% stock dividend on its common stock with a par value of $10. We need to find the amount of retained earnings that will be capitalized for the additional shares issued. 2. **Understand stock dividends:** A 100% stock dividend means the company issues additional shares equal to 100% of the shares outstanding. 3. **Capitalization of retained earnings:** When a stock dividend is issued, retained earnings are reduced (capitalized) by the value assigned to the new shares issued. 4. **Determine the value to capitalize:** The amount capitalized is generally based on the par value of the stock for a large stock dividend (usually 20% or more). Since this is a 100% stock dividend (a large stock dividend), the retained earnings capitalized equals the par value of the additional shares issued. 5. **Calculate the amount capitalized:** - Par value per share = $10 - Number of additional shares issued = 100% of existing shares = same as existing shares Therefore, the amount capitalized from retained earnings = par value × number of additional shares issued. Since the number of additional shares equals the number of existing shares, the total par value capitalized equals the par value of all existing shares. **Answer:** The amount of retained earnings capitalized is the par value of the additional shares issued. Hence, the correct choice is **Par value**.