On December 31, 2013, LeBlanc Corporation had t Record and post transactions; he following shareholders' equity accounts:

Question:

LEBLANC CORPORATION

Balance Sheet (partial)

December 31, 2013

Shareholders' equity

Common shares (unlimited number of shares authorized,

90,000 issued).............................................................$1,100,000

Retained earnings............................................................540,000

Total shareholders' equity...............................................$1,640,000

During the year, the following transactions occurred:

Jan. 15 Declared a $1 per share cash dividend to shareholders of record on January 31, payable February 15.

July 1 Announced a 3-for-2 stock split. Th e market price per share on the date of the announcement was $15.

Dec. 15 Declared a 10% stock dividend to shareholders of record on December 30, distributable on January 15. On December 15, the market price of each share was $10; on December 30, $12; and on January 15, $11.

31 Determined that profit before income tax for the year was $450,000. The company has a 30% income tax rate. Instructions

(a) Journalize the transactions and closing entries.

(b) Enter the beginning balances and post the entries in part (a) to the shareholders' equity accounts.

Taking It Further

Stock splits and stock dividends do not change the company's total assets. Given that, why does share price change aft er a stock split or stock dividend?

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