Lynn Company has outstanding 60,000 common shares of $10 par value and 25,000 preferred shares of $20 par value (8 percent). On December 1, 2017, the board of directors voted an 8 percent cash dividend on the preferred shares and a 10 percent stock dividend on the common shares. At the date of declaration, the common share price was $35 and the preferred share price was $20 per share. The dividends are to be paid, or issued, on February 15, 2018. The annual accounting period ends December 31.

Required:

Explain the comparative effects of the two dividends on the assets, liabilities, and shareholders? equity (a) through December 31, 2017, (b) on February 15, 2018, and (c) in regard to the overall effects from December 1, 2017, through February 15, 2018. Use the following structure:

Transcribed Image Text:

Comparative Effects Explained Stock Dividend on Common Cash Dividend Item on Preferred (a) Through December 31, 2017: Effect on Assets Effect on Liabilities Effect on Shareholders' Equity