A summary of the transactions affecting the stockholders equity of Strait Corporation during the current year follows:

A summary of the transactions affecting the stockholders’ equity of Strait Corporation during the current year follows:

Prior period adjustment (net of income tax benefit) . . . . . . . . . . . . . . . . . . . . . . . . $ (80,000)

Issuance of common stock: 10,000 shares of $10 par value

capital stock at $34 per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 340,000

Declaration and distribution of 5% stock dividend (6,000 shares,

market price $36 per share) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (216,000)

Purchased 1,000 shares of treasury stock at $35 . . . . . . . . . . . . . . . . . . . . . . . . . (35,000)

Reissued 500 shares of treasury stock at a price of $36 per share . . . . . . . . . . . 18,000

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 845,000

Cash dividends declared . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (142,700)

Instructions

a. Prepare a statement of stockholders’ equity for the year. Use these column headings and beginning balances. (Notice that all additional paid-in capital accounts are combined into a single column.)

b. What was the overall effect on total stockholders’ equity of the 5 percent stock dividend of 6,000 shares? What was the overall effect on total stockholders’ equity of the cash dividends declared? Do these two events have the same impact on stockholders’ equity? Why or whynot?

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Total Stock- Additional Paid-in Capital Stock ($10 par value Capital Earnings Stock Retained Treasury Equity Balances, Jan. 1 $1,100,000 $1,765,000 $950,000 -0$3,815,000