On March 1, 2019, Baltimore Corporation had 95,000 shares of common stock outstanding with a par value of $5 per share. On March 1, Baltimore Corporation authorized a 15% stock dividend when the market value was $10 per share. Use this information to calculate the amount either (debited) or credited to retained earnings. Enter as a negative number if retained earnings is debited and a positive number if retained earnings is credited.
2) The Common Stock account for Baltimore Corporation on January 1, 2018 was $62,500. On July 1, 2018 Baltimore issued an additional 7,500 shares of common stock. The Common Stock is $5 par. There was neither Preferred Stock nor any Treasury Stock. Paid in Capital Excess to par Common Stock was $20,000 on January 1 and $40,000 on July 2 and net income was $129,000. Use this information to determine for December 31, 2018 the amount of Earnings per Share (rounded to the nearest cent).
Question 1:
Amount of Stock dividend = 95000*5 = 475000*15% = $ 71,250
This amount is to be debited to retained earnings account.
Retained earnings debit by $ -(71250)
Stock dividend will be declared on the par value of the shares but not on market value
Question 2:
EPS = Net income attributable to shareholders/weighted average no. of shares
Net income attributable to shareholders = $ 129000
Weighted average no. of common shares:
8500 shares[(62500-20000)/5] outstanding from beginning = 8500 shares
7500 shares outstanding for 6 months = 7500*6/12 = 3750 shares
Total weighted avg. no of shares = 12250 shares
EPS = 129000/12250 = $ 10.53
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