Beacon Corporation issued a 5 percent stock dividend on 27,500 shares of its $9 par common stock. At the time of the dividend, the market value of the stock was $30 per share.

Required:

1. Compute the amount of the stock dividend.

2. Show the effects of the stock dividend on the financial statements using a horizontal statements model like the following one. In the Cash Flow column, indicate whether the item is an operating activity (OA), investing activity (IA), or financing activity (FA). If an element was not affected by the event, leave the cell blank.

A. Compute the amount of the stock dividend. Stock Dividend ______ B. Show the effects of the stock dividend on the financial statements using a horizontal statements model like the following one. In the Cash Flow column, indicate whether the item is an operating activity (OA), investing activity (IA), or financing activity (FA). If an element was not affected by the event, leave the cell blank. (Enter any decreases to account balances with a minus sign.)

BEACON CORPORATION

Horizontal Statements Model

Balance Sheet

Income Statement

Assets

=

Liabilities

+

Stockholders Equity

Revenue

Expense

=

Net Income

Statement of Cash Flow

Cash

=

+

Common Stock

+

PIC in Excess

+

Retained Earnings

=

=

+

+

+

=