On June 30, Sharper Corporation’s common stock is priced at
$26.00 per share before any stock dividend or split, and the
stockholders’ equity section of its balance sheet appears as
follows.
Common stock—$6 par value, 90,000 shares authorized, 36,000 shares issued and outstanding |
$ | 216,000 | ||
Paid-in capital in excess of par value, common stock | 100,000 | |||
Retained earnings | 316,000 | |||
Total stockholders’ equity | $ | 632,000 | ||
1. Assume that the company declares and
immediately distributes a 100% stock dividend. This event is
recorded by capitalizing retained earnings equal to the stock’s par
value.
a., b. & c. Complete the below table to
calculate the retained earnings balance, total stockholders’ equity
and number of outstanding shares.
2. Assume that the company implements a 3-for-2
stock split instead of the stock dividend in part 1.
a., b. & c. Complete the below table to
calculate the retained earnings balance, total stockholders’ equity
and number of outstanding shares.
1 | |||
Stock Dividend | Before Stock Dividend | Impact of Stock Dividend | After Stock Dividend |
Common stock | 216,000 | 216,000 | 432,000 |
Paid in capital in excess of par value | 100,000 | 0 | 100,000 |
Total contributed capital | 316,000 | 216,000 | 532,000 |
Retained Earnings | 316,000 | -216,000 | 100,000 |
Total Stockholders' Equity | 632,000 | 0 | 632,000 |
Number of common shares outstanding | 36,000 | 36,000 | 72,000 |
2 | |||
Stock Split | Before Stock Split | Impact of Stock Split | After Stock Split |
Common stock | 216,000 | 0 | 216,000 |
Paid in capital in excess of par value | 100,000 | 0 | 100,000 |
Total contributed capital | 316,000 | 0 | 316,000 |
Retained Earnings | 316,000 | 0 | 316,000 |
Total Stockholders' Equity | 632,000 | 0 | 632,000 |
Number of common shares outstanding | 36,000 | 18,000 | 54,000 |
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