Question

On June 30, 2011, Ole Town, Inc's reported its capital accounts as follows:
Common Shares, no par, 40,000 shares outstanding $1,600,000
Retained Earnings 3,200,000
10. If a $2 per share cash dividend were declared but not paid. The capital accounts balances would show revised balances as follows:
a. Common Shares: $1,520,000 and Retained Earnings: $3,280,000.
b. Common Shares: $1,600,000 and Retained Earnings: $3,120,000.
c. Common Shares: $1,600,000 and Retained Earnings: $3,200,000.
d. Common Shares: $1,520,000 and Retained Earnings: $3,120,000.
e. None of the above but: .
11. A 100% stock dividend (considered as a large stock dividend) was declared and distributed. The capital accounts balances would show revised balances as follows:
a. Common Shares: $1,760,000; Retained Earnings: $2,940,000 and Contributed Surplus: $100,000.
b. Common Shares: $1,860,000 and Retained Earnings: $2,940,000.
c. Common Shares: $1,600,000 and Retained Earnings: $3,200,000.
d. Common Shares: $1,860,000 and Retained Earnings: $3,460,000.
e. None of the above but: .

12. A 10% stock dividend was declared and distributed. Just after the date of declaration, the shares were traded at $65 per share. The capital accounts balances would show revised balances as follows:
a. Common Shares: $1,600,000; Retained Earnings: $2,940,000 and Contributed Surplus: $260,000.
b. Common Shares: $1,860,000 and Retained Earnings: $2,940,000.
c. Common Shares: $1,760,000 and Retained Earnings: $3,040,000.
d. Common Shares: $1,760,000 and Retained Earnings: $3,460,000.
e. None of the above but: would also accept at $59.09; thus common shares = 1,836,360; RE $2,963640

Answer 1

10) Revised balance :

Common Shares = 1600000

Retained earnings = 3200000-(40000*2) = 3120000

So answer is b. Common Shares: $1,600,000 and Retained Earnings: $3,120,000.

11) 100% Stock dividend

Common Shares = 1600000*2 = 3200000

Retained earnings = 3200000-1600000 = 1600000

So answer is e) Non of the above but Common Shares $3200000; Retained earnings $1600000

12) 10% Stock dividend

Common Shares = 1600000+260000 = 1860000

Contributed surplus = 3200000-260000 = 2940000

So answer is b) Common shares $1860000; Retained earnings $2940000