The stockholders equity section of the balance sheet of Rago Corporation as of December 31, 2010, was

Question:

The stockholders’ equity section of the balance sheet of Rago Corporation as of December 31, 2010, was as follows:

Contributed capital

Common stock, $4 par value, 250,000 shares

authorized, 100,000 shares issued

and outstanding ........... $ 400,000

Additional paid-in-capital ........ 500,000

Total contributed capital ........ $ 900,000

Retained earnings ............ 600,000

Total stockholders’ equity ........ $ 1,500,000

Rago Corporation had the following transaction in 2011:

Feb 28 The board of directors declared a 10 percent stock dividend to stockholders of record on March 25 to be distributed on April 5. the market value on this date is $16.

Mar 25 Date of record for stock dividend.

Apr 5 Issued stock dividend.

Aug. 3 Declared a 2-for-1 stock split.

Nov. 20 Purchased 9,000 shares of the company’s common stock at $8 per share for the treasury.

Dec 31Declared a 5 percent stock dividend to stockholders of record on January 25 to be distributed on February 5. The market value per share was $9.

Required

1. Record the stockholders equity components of the transaction for Rago Corporation in T accounts.

2. Prepare the stockholders’ equity section of the company’s balance sheet as of December 31, 2011. Assume net income for 2011 is $54,000

3. If you owned 500 shares of Rago stock on February 1, 2011, how many shares would you own on February 5, 2012? Would your proportionate share of the ownership of the company be different on the latter from what it was on the former date? Explain your answer

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