Problem 11-5A Dividends and Stock Splits
Problem 11-5A Dividends and Stock Splits
On January 1, 2014, Svenberg Inc.’s Stockholders’ Equity category appeared as follows:
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Preferred stock, $80 par value, 8%,   1,000
shares issued and outstanding                                   $     80,000 Common stock, $10 par value, 10,000  shares
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issued and outstanding
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100,000
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Additional paid-in capital—Preferred
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60,000
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Additional paid-in capital—Common
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225,000
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Total contributed capital
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$Â Â 465,000
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Retained earnings
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1,980,000
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Total stockholders’ equity
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$2,445,000
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The preferred stock is noncumulative and nonparticipating. During 2014, the following transac- tions occurred:
a.     On March 1, declared a cash dividend of $6,400 on preferred stock. Paid the dividend on April 1.
b.     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.
c.      On September 1, declared a cash dividend of $0.70 per share on the common stock; paid the dividend on October 1.
d.     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 transaction’s effect on the stockholders’ equity accounts and the total stock- holders’ equity.
2.       Develop the Stockholders’ Equity category of the balance sheet. Assume that the net income for the year was $720,000.
3.       Write a paragraph that explains the difference between a stock dividend and a stock split.
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Answers
Status NEW
Posted 08 Oct 2017 08:10 PM
My Price 6.00
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file 1507494716-Problem 11-5A Dividends and Stock Splits.xlsx preview (373 words )
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