Question
Brady Company has 30,000 shares of $10 par value common stock authorized and 20,000 shares issued and outstanding. On August 13, 2019, Brady purchased 1,000
Brady Company has 30,000 shares of $10 par value common stock authorized and 20,000 shares issued and outstanding. On August 13, 2019, Brady purchased 1,000 shares of treasury stock for $12 per share. Brady uses the cost method to account for treasury stock. On September 14, 2019, Brady sold 500 shares of the treasury stock for $14 per share.
In October 2019, Brady declared and distributed 2,000 shares as a stock dividend from unissued shares when the market value of the common stock was $16 per share.
On December 21, 2019, Brady declared a $1 per share cash dividend, payable on January 11, 2020, to shareholders of record on December 31, 2019.
Required:
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How should Brady account for the cash dividend, and how would it affect Bradys balance sheet at December 31, 2019? Explain why.
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How should Brady account for the stock dividend, and how would it affect Bradys shareholders equity at December 31, 2019? Explain why.
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How should Brady account for the purchase and sale of the treasury stock, and how should the treasury stock be presented in Bradys balance sheet at December 31, 2019?
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