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Chapter 13: Q9SE-3 (page 709)

Question: Journalizing a small stock dividend

Element Water Sports has 13,000 shares of \(1 par value common stock outstanding.

Element distributes a 5% stock dividend when the market value of its stock is \)15 per share.

Requirements

3. What is the overall effect on total stockholders鈥� equity?

Short Answer

Expert verified

Answer

No effect of stock dividend will be traced on the shareholders鈥� equity.

Step by step solution

01

Basic Introduction-

Shareholders鈥� equity represents the value invested by the owner of the corporation in the corporation either through retained earnings over time or investing cash.

02

The overall effect on total stockholders’ equity -

A stock dividend increases by the par value of the stock being distributed the total stockholders' equity. But there is no effect of the stock dividend on total stockholders' equity.

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Most popular questions from this chapter

A Identifying sources of equity, stock issuance, and dividends

Voyage Comfort Specialists, Inc. reported the following stockholders鈥� equity on its balance sheet at June 30, 2018:

Preferred Stock鈥�7%, ? Par Value; 625,000 shares

authorized, 280,000 shares issued and outstanding

Paid-In Capital:

\( 1,400,000

1,340,000

Stockholders鈥� Equity

Paid-In Capital in Excess of Par鈥擟ommon 2,900,000

Total Paid-In Capital 5,640,000

Retained Earnings 12,000,000

Total Stockholders鈥� Equity \) 17,640,000

Common Stock鈥�$1 Par Value; 3,000,000 shares

authorized, 1,340,000 shares issued and outstanding

Requirements

1. Identify the different classes of stock that Voyage Comfort Specialists has outstanding.

Computing earnings per share

HEB Corporation had net income for 2018 of \(60,450. HEB had 15,500 shares of common stock outstanding at the beginning of the year and 20,100 shares of common stock outstanding as of December 31, 2018. During the year, HEB declared and paid preferred dividends of \)2,600. Compute HEB鈥檚 earnings per share.

Analyzing the effect of prior-period adjustments

Taylor Corporation discovered in 2019 that it had incorrectly recorded in 2018 a cash payment of \(70,000 for utilities expense. The correct amount of the utilities expense was \)35,000.

Requirements

2. How should this error be reported in the 2019 financial statements?

What is the effect on the accounting equation when cash dividends are declared?

What is the effect on the accounting equation when cash dividends are paid?

Journalizing treasury stock transactions and reporting stockholders鈥� equity

Southern Amusements Corporation had the following stockholders鈥� equity on

November 30:

Paid-In Capital:

Common Stock鈥擻(5 Par Value; 1,300 sharesauthorized, 250 shares issued and outstanding1,250

Retained Earnings50,000

Total Stockholders鈥� Equity \) 55,000

Stockholders鈥� Equity

Paid-In Capital in Excess of Par鈥擟ommon 3,750

Total Paid-In Capital

\(5,000

On December 30, Southern purchased 200 shares of treasury stock at \)15 per share.

Requirements

3. How many shares of common stock are outstanding after the purchase oftreasury stock?
See all solutions

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