-4000 x 9/12 x 1.1**= -3300

12000 x 6/12 x 1.1***= 6600

44,000 - 3300 + 6600 = 47,300 or,

more evidently seen using this calculation:

1.1(40,000 - 3,000 + 6,000) = 47,300

* The 10% stock dividend are treated as outstanding for the whole year; therefore 12/12 fraction is used.  The 1.1 represents the 10% stock dividend applied retrospectively to the outstanding shares at the beginning of the year.

** The 10% stock dividend are treated as outstanding for the whole year.  The factor 1.1 (1 + 10%) is used to find the weighted average shares outstanding for the 9 months when the outstanding Treasury Stock was purchased back.

*** The 10% stock dividend are treated as outstanding for the whole year; therefore 6/12 fraction is used to find the weighted average shares outstanding for the 6 months when the 12,000 new shares were issued.

Basically, since there were treasury shares purchases and new stock issued during the period prior to the stock dividend, the portion of the dividend attributed to the reduction in stock and addition in new shares is assumed to have occurred on the date t-stock was purchased and the new shares were sold.

I also updated the google docs link to show how the outstanding shares are affected from each transaction. 
http://spreadsheets.google.com/ccc?key=0Atfxefm9DKu4dE85a2Q2 QnlRRmZJc05oeUl3WEdxYWc&hl=en

I hope that helps!

ael719 wrote: Adding the 4,800 stock dividend at the beginning of the year would means that there was a 12% (44,800 / 40,000) stock dividend at the beginning of the year.  It throws off the weighted average by 800 shares for 6 months when those shares did not exist.  The 800 shares were created by the 12,000 new shares issued on 6/30 minus the 4000 treasury stock purchase on 4/1.  To apply the stock dividend retrospectively we have to use the 10% rate.

In your most recent chart the retrospective treatment of the stock dividend is applied to each event as a percentage rate. I, on the other hand, had applied the stock dividend as an amount and only to the beginning balance of c/s. More specifically, I added 10% of the c/s outstanding at 10/1 (tot. of 4,800 shares). I left the following events of 4/1 and 6/30 alone because I had already included the amount of the 10% stock dividend to the beginning balance and carrying it forward would only offset the weighted average for double counting or so I thought...I can recognize your answer to be the right one because you can show the 10% applied evenly to each event during the year, whereas mine shows only a 12% adjustment to 1/1, not even at all, right? 

Just to add a little bit more to this topic, what if intead of a stock split at 10/1, there was a 2:1 stock split on the same date?

thanks for such detailed explanation :)

with regards to stock dividends, i was just doing a mcq and wanted to be clear as to what stock dividends do to total stock holder's equity.  When a stock dividend is declared (large or small) we are turning a given amount of Retained Earnings into Common Stock, is that right? and the main difference between a cash dividend and a stock dividend would then be that a cash dividend is obviously cash the stock holders receive at some point, whereas the stock dividend are new shares of c/s issued to the stock holders...that's where i'm a bit confussed because according to the question total stock holders' equity does not change. As I'm typing this a realized I read the question incorrectly. I assumed total stock holders' equity had to increase bc c/s increased too, I did not consider stock holders equity is also made of RE and APIC. So the amount of RE reclassified as common stock cancels out and there is no change in S.H.E... here's the question:

How would the declaration of a 15% stock dividend affect each of the following:

....Retained Earnings (RE)..........Tot. Stock Hold. Equity

a).......No Effect...........................No Effect

b).......No Effect...........................Decrease

c).......Decrease...........................No Effect

d).......Decrease...........................Decrease

Answer: (c)

Decrease to retained earnings - no effect on shareholder's equity
Rule: A stock dividend (less than 20-25% of stock outstanding) is treated by transferring the FMV of the stock dividend at declaration date from retained earnings to capital stock and paid-in capital.  There is no effect on total shareholder's equity because all transfers take place within shareholder's equity.

To illustrate say,

Total Stock Holders Equity in the Bal. Sheet at 12/31 the prior year showed:

RE...................$20,000

c/s($1 par).......$10,000

APIC................$5,000

TOTAL.............$35,000

At the date the 15% stock dividend was declared on the current year (let's also assume the fair value of the c/s was $2 per share only bc for a small stock dividends we are allowed to book it at the fair value) then journal entry would be:

(dr) RE......... $3,000

....(cr)c/s................$1,500

....(cd) APIC.............$1,500

After reclassifying some RE into c/s (or like on prof. Levine used to say, putting money from one pocket into the other) you can see there was NO CHANGE in the TOTAL BALANCE of Stock Holders Equity, see bolow

Total Stock Holders Equity in the Bal. Sheet at 12/31 of the current year would show:

RE...................$17,000

c/s($1 par).......$11,500

APIC................$6,500

TOTAL.............$35,000 (No Change, same bal. as last year)

Now, if it was a large stock dividend, that is >20-25% (rule), and say 30% for this example. Then the JE would be:

(dr) RE......... $6,000

....(cr)c/s................$6,000

We do not record it a fair value, large stock dividends are only recorded at par. Becker pg F7-20 shows 2 entries:

(1) (dr)RE............................$6,000

.........(cr) distributable c/s.................$6,000

(2) (dr) distributable c/s..........$6,000

.........(cr) common stock...................$6,000

I only did one because in the end common stock will be credited. If someone could give some info on why is it crucial that we (cr) dist. c/s first, please share

Finally, the Bal. Sheet would show:

RE...................$14,000

c/s($1 par).......$16,000

APIC................$5,000

TOTAL.............$35,000 (Still No Change, same bal. as last year)

okay! 1 down 999 questions to go :)