During the year ended December 31, 2017, Liberty Inc reported the following equity events March 31, 2017 10 percent stock dividend April 15, 2017 $1 cash dividend per share June 30, 2017 Three for one stock split October 15, 2017 $0 60 cash dividend per share The equity section of Liberty 's balanc...

a Average amount paid by shareholders for the shares already outstanding is used to determine the amount that will be transferred from Retained earnin ...

During the year ended December 31, 2017, Liberty Inc. reported the following equity events: March 31, 2017

Question:

During the year ended December 31, 2017, Liberty Inc. reported the following equity events: March 31, 2017 10 percent stock April 15, 2017 $1 cash per share June 30, 2017 Three-for-one stock split October 15, 2017 $0.60 cash per share.
The equity section of Liberty's on December 31, 2016 was as follows:
Common shares (unlimited number of shares
10,000,000 authorized, 1,000,000 issued and outstanding)...$ 5,750,000
Retained earnings.........................................................................12,450,000
Net income for fiscal 2017 was.................................................. $3,500,000
In previous years, Liberty paid its share holders annual dividends of $2.50 per share.

Required:
a. Prepare Liberty's shareholders' equity section on December 31, 2017.
b. Calculate basic earnings per share for 2017. What would EPS have been if the stock split and stock had not occurred?
c. As a Liberty shareholder, what is your reaction to the reduction in the per share from $2.50 per share to $1.60 per share?
d. The market value of Liberty's shares on December 31, 2017 was $18.20 per share.
What do you estimate the market price of the shares would have been had the stock and stock split not occurred? Explain your answer.
e. Calculate Liberty's price-to-book ratio on December 31, 2017. What would the price-to-book ratio have been had the stock split and stock not occurred?
f. What would Liberty's payout ratio be for 2017 and the yield on December 31, 2017? How would these amounts be affected by the stock and stock split? Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial... Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...