Question
eBook Dividends and Stock Splits On January 1, 2017, Svenberg Inc.'s Stockholders' Equity category appeared as follows: Preferred stock, $80 par value, 8%, 1,000 shares
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eBook
Dividends and Stock Splits
On January 1, 2017, Svenberg Inc.'s Stockholders' Equity category appeared as follows:
Preferred stock, $80 par value, 8%, 1,000 shares issued and outstanding $80,000 Common stock, $10 par value, 10,000 shares issued and outstanding 100,000 Additional paid-in capitalPreferred 60,000 Additional paid-in capitalCommon 225,000 Total contributed capital $465,000 Retained earnings 1,980,000 Total stockholders equity $2,445,000 The preferred stock is noncumulative and nonparticipating. During 2017, the following transactions occurred:
- On March 1, declared a cash dividend of $6,400 on preferred stock. Paid the dividend on April 1.
- On June 1, declared an 8% stock dividend on common stock. The current market price of the common stock was $26. The stock was issued on July 1.
- On September 1, declared a cash dividend of $0.70 per share on the common stock; paid the dividend on October 1.
- On December 1, issued a 3-for-1 stock split of common stock, when the stock was selling for $30 per share.
Required:
1. Explain each transactions effect on the stockholders equity accounts and the total stockholders equity.
Transaction Effect on total stockholders' equity On March 1, declared a cash dividend of $6,400 on preferred stock DecreaseIncreaseUnchanged
Paid the dividend on April 1 DecreaseIncreaseUnchanged
On June 1, declared an 8% stock dividend on common stock. The current market price of the common stock was $26 DecreaseIncreaseUnchanged
The stock was issued on July 1 DecreaseIncreaseUnchanged
On September 1, declared a cash dividend of $0.70 per share on the common stock DecreaseIncreaseUnchanged
Paid the dividend on October 1 DecreaseIncreaseUnchanged
On December 1, issued a 3-for-1 stock split of common stock, when the stock was selling for $30 per share DecreaseIncreaseUnchanged
2. Develop the Stockholders' Equity category of the balance sheet. Assume that the net income for the year was $720,000. Do not round interim par value calculations.
Svenberg Inc. Partial Balance Sheet December 31, 2017 Stockholders' equity Account receivableAccounts payableCashPreferred stock, $80 par, 8%, 1,000 shares issued and outstandingTreasury stock
$- Select - Accounts payableCashCommon stock, $3.33 par, 32,400 shares issued and outstandingStock dividends payableTreasury stock
- Select - Additional paid-in capital-preferred stockAccounts payableCashStock dividends payableTreasury stock
- Select - Additional paid-in capital-common stockAccount receivableAccounts payableCashTreasury stock
- Select - Total contributed capital $fill in the blank fc881d062073035_9 Account receivableAccounts payableCashStock dividends payableRetained earnings
- Select - Total stockholders' equity $fill in the blank fc881d062073035_12 A large stock dividend results in the capitalization of part of the Retained Earnings account.There is no change to any of the capital accounts in a stock split.There is an increase in the number of outstanding shares in a stock split, which is offset by a corresponding decrease in the par value of those shares.The value of the shares issued in the large stock dividend is added to the Retained Earnings account and deducted from the Capital Stock account.
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