Question
In: Accounting
Accounting for Share Transactions The shareholders' equity section of the consolidated balance sheet of Wilson Industries...
Accounting for Share Transactions
The shareholders' equity section of the consolidated balance sheet
of Wilson Industries appeared as follows at the beginning of the
year:
| Shareholders' Equity | |
| Class A common stock, $0.02 par value; 20,000,000 shares authorized; | |
| 6,100,000 shares issued | $122,000 |
| Additional paid-in-capital | 236,254,000 |
| Retained earnings | 28,540,000 |
| Currency translation adjustment | (4,824,000) |
| Total equity |
$260,092,000 |
The following events occurred sequentially during the year:
- A 2-for-1 forward stock split was executed.
- A ten percent stock dividend was distributed when the Wilson share price was $40 per share.
- Treasury stock valued at $6,000,000 was repurchased when the Wilson share price was $25 per share.
Required
1. How many Class A common shares are outstanding following the above events?
Answer
2. What is the par value per share of the Class A common stock following the above events? Round to the nearest three decimal places.
$Answer
3. Prepare a spreadsheet to illustrate the financial effects associated with the above three share transactions.
Use a negative sign with answers to indicate a reduction in an account balance and with treasury stock repurchase and balance.
| Wilson Industries | ||||
|---|---|---|---|---|
Transaction |
Stock Split |
Stock Dividend |
Share Repurchase |
Balance Sheet Totals |
| Assets | ||||
| Cash | $Answer | $Answer | $Answer | $Answer |
| Shareholders' Equity | ||||
| Common stock | Answer | Answer | Answer | Answer |
| APIC | Answer | Answer | Answer | Answer |
| Retained earnings | Answer | Answer | Answer | Answer |
| Treasury stock | Answer | Answer | Answer | Answer |
| Total Shareholders' Equity | $Answer | |||
4. Calculate the total value of shareholders' equity following the above events.
$Answer
Solutions
Expert Solution
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| Part 1 | |||||
| Beginning outstanding shares | 6,100,000 | ||||
| 2 for 1 Split | 12,200,000 | ||||
| No of Shares outstanding after split | 18,300,000 | ||||
| Add: 10% of Stock Dividend | 1,830,000 | ||||
| Less: Treasury stock | $6,000,000/$25 | -240,000 | |||
| Class A Common Shares Outstanding | 19,890,000 | ||||
| Part 2 | |||||
| Par Value after Split | $0.02/2 | $ 0.01 | |||
| Part 3 | |||||
| Wilson Industries | |||||
| Balance | |||||
| Transaction | Stock | Stock | Share | Sheet | |
| Split | Dividend | Repurchase | Totals | ||
| Assets | |||||
| Cash | $ -6,000,000 | $ -6,000,000 | |||
| Shareholders' Equity: | |||||
| Common stock | $ 18,300 | $ 18,300 | |||
| APIC | $ 73,181,700 | $ 73,181,700 | |||
| Retained earnings | $ -73,200,000 | $-73,200,000 | |||
| Treasury stock | $ -6,000,000 | $ -6,000,000 | |||
| Total Shareholders' Equity | $ - | $ - | $ -6,000,000 | $ -6,000,000 | |
| Part 4 | |||||
| Equity Beginning | $ 260,092,000 | ||||
| Less: Period Transaction (From Part 3) | $ -6,000,000 | ||||
| $ 254,092,000 | |||||
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