The Western Pipe Company has the following capital section in its balance sheet. Its stock is currently selling for $5 per share.
Common stock (35,000 shares at $2 par) $ 70,000
Capital in excess of par 70,000
Retained earnings 160,000
Total equity $ 300,000
The firm intends to first declare a 10 percent stock dividend and then pay a 15-cent cash dividend (which also causes a reduction of retained earnings). Show the capital section of the balance sheet after the first transaction and then after the second transaction. (Do not round intermediate calculations and round your answers to the nearest whole dollar.
After first transaction | After stock dividend |
Common stock | ? |
Capital excess of par | ? |
Retained earnings | ? |
Total Equity | ? |
After second transaction | After stock dividend |
Common stock | |
capital in excess of par | |
Retained earnings | |
Total equity |
after first transaction | after stock dividend |
common stock (35,000 shares +10% =>38,500 shares @$2 par) | $77,000 |
capital in excess of par (70,000 + 3500 shares of stock dividend * ($5 selliing price - $2 par value) =. (70,000 +(3500*3)) => | 80,500 |
retained earnings (160,000 - (3500 shares * 5)) | 142,500 |
total equity | 300,000 |
now,
after second transaction | after cash dividend |
common stock (38500 shares *$2) | 77,000 |
capital in excess of par (same as above) | 80,500 |
retained earnings (142,500 - (0.15 cent dividend* 38500 shares) | 136,725 |
total equity | 294,225 |
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