The stockholders' equity section of Waterbury Linen Mills, Inc., as of December 31, 20x7, was as follows:

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The stockholders' equity section of Waterbury Linen Mills, Inc., as of December 31, 20x7, was as follows:
Contributed capital
Common stock, $3 par value, 500,000 shares
Authorized, 40,000 shares issued and outstanding....................... $120,000
Additional paid-in capital....................................................... 37,500
Total contributed capital...................................................... $157,500
Retained earnings............................................................... 120,000
Total stockholders' equity.................................................... $277,500
A review of the stockholders' equity records of Waterbury Linen Mills, Inc., disclosed the following transactions during 20x8:
Mar. 25 The board of directors declared a 5 percent stock dividend to stockholders of record on April 20 to be distributed on May 1. The market value of the common stock was $21 per share.
Apr. 20 Date of record for stock dividend.
May
1 Issued stock dividend.
Sept.
10 Declared a 3-for-1 stock split.
Dec. 15 Declared a 10 percent stock dividend to stockholders of record on January 15 to be distributed on February 15. The market price on this date is $9 per share.
Required
1. Record the stockholders' equity components of the transactions for Waterbury Linen Mills, Inc., in T accounts.
2. Prepare the stockholders' equity section of the company's balance sheet as of December 31, 20x8. Assume net income for 20x8 is $247,000.
3. If you owned 1,000 shares of Waterbury Linen Mills stock on May 1, 20x8, how many shares would you own on February 15, 20x9? Would your proportionate share of the ownership of the company be different on the latter date than it was on the former date? Explain your answer.
Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on...
Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...
Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...
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Principles of Accounting

ISBN: 978-0618736614

10th edition

Authors: Belverd Needles, Marian Powers, Susan Crosson

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