P15-8B (L07,8) (Dividends and Splits) Wellington Company provides you with the following condensed balance sheet information.
Assets Liabilities and Stockholders’ Equity
Current assets $ 78,000 Current and long-term liabilities $120,000
Equity investments (Liquid Co Stockholders’ equity
Stock;40,000 shares at cost) 124,000 Common stock ($1 par) $ 41,000
Equipment (net) 189,000 Paid-in capital in excess of par 189,000
Intangibles 90,000 Retained earnings 131,000 361,000
Total assets $481,000 Total liabilities and
stockholders’ equity $481,000
Instructions
For each transaction below, indicate the dollar impact (if any) on the following five items: (1) total assets, (2) common stock, (3) paid-in capital in excess of par, (4) retained earnings, and (5) stockholders’ equity. (Each situation is independent.)
(a) Wellington declares and pays a $0.25 per share cash dividend.
(b) Wellington declares and issues a 15% stock dividend when the market price of the stock is $8 per share.
(c) Wellington declares and issues a 40% stock dividend when the market price of the stock is $7 per share.
(d) Wellington declares and distributes a property dividend. Wellington gives one share of Liquid Co. stock for every four shares of Wellington Company stock held. Liquid Co. is selling for $3.50 per share on the date the property dividend is declared.
(e) Wellington declares a 1-for-2 reverse stock split and issues new shares.
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