Dividends, stock splits, and stockholders’ equity

P6. The stockholders’ equity section of Minh, Inc.’s balance sheet as of December 31, 2013, follows.

Contributed capital:

 

 

Â	Common stock, $3 par value, 1,000,000 shares authorized, 80,000 shares issued and outstanding	$240,000
Â	Additional paid-in capital	75,000
Â	Total contributed capital	$315,000
Â	Retained earnings	  240,000
Â	Total stockholders’ equity	$555,000

A review of Minh’s stockholders’ equity records disclosed the following transactions during 2014:

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 these transactions using T accounts.

2.    Prepare the stockholders’ equity section of Minh’s balance sheet as of December 31, 2014. Assume net income for 2014 is $494,000.

3.    aCCounting ConneCtion ▶ If you owned 2,000 shares of Minh stock on March 1, 2014, how many shares would you own on February 15, 2015? Would your pro- portionate share of the ownership of the company be different on the latter date from what it was on the former date? Explain your answer.