Accounting Dividends And Stockholders Equity Transactions Homework Help
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1. Dividends and Stock Splits
On January 1, 2010, Frederiksen Inc.’s Stockholders’ Equity category appeared as follows
Preferred stock, $80 par value, 7%,
3,000 shares issued and outstanding …………$ 240,000
Common stock, $10 par value,
15,000 shares issued and outstanding …………..150,000
Additional paid-in capital—Preferred ……………60,000
Additional paid-in capital—Common …………..225,000
Total contributed capital …………..…………..$ 675,000
Retained earnings …………..…………..…….2,100,000
Total stockholders’ equity …………..……….$2,775,000
The preferred stock is noncumulative and nonparticipating. During 2010, the following transactions occurred
a. On March 1, declared a cash dividend of $16,800 on preferred stock. Paid the dividend on April 1.
b. On June 1, declared a 5% stock dividend on common stock. The current market price of the common stock was $18. The stock was issued on July 1.
c. On September 1, declared a cash dividend of $0.50 per share on the common stock; paid the dividend on October 1.
d. On December 1, issued a 2-for-1 stock split of common stock when the stock was selling for $50 per share.
a. Explain each transaction’s effect on the stockholders’ equity accounts and the total stockholders’ equity.
b. Develop the Stockholders’ Equity category of the December 31, 2010, balance sheet. Assume that the net income for the year was $650,000.
c. Write a paragraph that explains the difference between a stock dividend and a stock split.
2. Stock Dividends versus Stock Splits
Campbell Company wants to increase the number of shares of its common stock outstanding and is considering a stock dividend versus a stock split. The Stockholders’ Equity section of the firm’s most recent balance sheet appeared as follows
Common stock, $10 par, 50,000 shares issued and outstanding ………. $ 500,000
Additional paid-in capital ……………………………………………… 750,000
Retained earnings ……………………………………………………… 880,000
Total stockholders’ equity ……………………………………………… $2,130,000
If a stock dividend is chosen, the firm wants to declare a 100% stock dividend. Because the stock dividend qualifies as a large stock dividend, it must be recorded at par value. If a stock split is chosen, Campbell will declare a 2-for-1 split.
1. Compare the effects of the stock dividends and stock splits on the accounting equation.
2. Develop the Stockholders’ Equity category of Campbell’s balance sheet
(a) After the stock dividend and
(b) After the stock split.
3.Effects of Stockholders’ Equity Transactions on the Balance Sheet
The following transactions occurred at Horton Inc. during its first year of operation
a. Issued 100,000 shares of common stock at $5 each; 1,000,000 shares are authorized at $1 par value.
b. Issued 10,000 shares of common stock for a building and land. The building was appraised for $20,000, but the value of the land is undeterminable. The stock is selling for $10 on the open market.
c. Purchased 1,000 shares of its own common stock on the open market for $16 per share.
d. Declared a dividend of $0.10 per share on outstanding common stock. The dividend is to be paid after the end of the first year of operations. Market value of the stock is $26.
e. Declared a 2-for-1 stock split. The market value of the stock was $37 before the stock split.
f. Reported $180,000 of income for the year.
a. Indicate each transaction’s effect on the assets, liabilities, and stockholders’ equity of Horton Inc.
b. Prepare the Stockholders’ Equity section of the balance sheet.
c. Write a paragraph that explains the number of shares of stock issued and outstanding at the end of the year.
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4.Effects of Stockholders’ Equity Transactions on Balance Sheet
The following transactions occurred at Hilton Inc. during its first year of operation:
a. Issued 10,000 shares of common stock at $10 each; 100,000 shares are authorized at $1 par value.
b. Issued 10,000 shares of common stock for a patent, which is expected to be effective for the next 15 years. The value of the patent is undeterminable. The stock is selling for $10 on the open market.
c. Purchased 1,000 shares of its own common stock on the open market for $10 per share.
d. Declared a dividend of $0.50 per share of outstanding common stock. The dividend is to be paid after the end of the first year of operations. Market value of the stock is $10. e. Reported $340,000 of income for the year.
a. Indicate each transaction’s effect on the assets, liabilities, and stockholders’ equity of Hilton Inc.
b. Hilton’s president has asked you to explain the difference between contributed capital and retained earnings. Discuss the terms as they relate to Hilton.
c. Determine the book value per share of the stock at the end of the year.
5.Effects of Stockholders’ Equity Transactions on Balance Sheet
The following transactions are for Weber Corporation in 2010
a. On March 1, the corporation was organized and received authorization to issue 5,000 shares of 8%, $100 par value preferred stock and 2,000,000 shares of $10 par value common stock.
b. On March 10, Weber issued 5,000 shares of common stock at $35 per share.
c. On March 18, Weber issued 100 shares of preferred stock at $120 per share.
d. On April 12, Weber issued another 10,000 shares of common stock at $45 per share.
a. Identify and analyze the effect of each transaction.
b. Prepare the Stockholders’ Equity section of the balance sheet as of December 31, 2010.
c. Does the balance sheet indicate the market value of the stock at year-end? Explain.
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