On July 1, Jones Corporation had the following capital structure: Common Stock, par $1; 8,000,000 authorized...

On July 1, Jones Corporation had the following capital structure:


Common Stock, par $1; 8,000,000 authorized shares, 110,000 issued and outstanding	$	110,000
Additional Paid-in Capital		92,000
Retained Earnings		172,000
Treasury Stock		None

Required:
Complete the following table based on two independent cases involving stock transactions: (Round "per share" answers to 2 decimal places.)

Case 1:	The board of directors declared and issued a 100 percent stock dividend when the stock price was $7 per share.
Case 2:	The board of directors voted a 2-for-1 stock split. The stock price prior to the split was $7 per share.

		Case 1	Case 2
Items	Before Stock Transactions	After 100% Stock Dividend	After Stock Split
Number of Shares Outstanding
Par Per Share	$1.00
Common Stock Account
Additional Paid-in Capital	92,000
Retained Earnings	172,000
Total Stockholders' Equity

Expert Solution

All working forms part of the answer
Case 1 Working

A	Outstanding no. of shares	110,000
B	Stock Dividend rate	100%
C = A x B	No. of shares issuable as Stock Dividend	110,000
D	Par Value per share	$ 1
E = C x D	Stock Dividend distributed	$ 110,000
F = A + E	No. of shares after Stock Dividend	$ 220,000
G = F x D	Common Stock Value after Stock Dividend	$ 220,000
H	Retained earnings before Stock Dividend	$ 172,000
I = H - E	Retained earnings after Stock Dividend	$ 62,000

Case 2 Working

Existing no. of shares = 110,000 shares

Shares split ratio = 2 : 1

No. of shares after Stock Split = 110000 x 2/1 = 220,000 shares

New Par Value = $ 1 x ½ = $ 0.50 per share

Rest all the values will remain same.

Requirement, as asked

		Case 1	Case 2
Items	Before Stock Transactions	After 100% Stock Dividend	After Stock Split
		[See working]	[See working]
Number of Shares Outstanding	110,000	220,000	220,000
Par Per Share	$ 1.00	$ 1.00	$ 0.50
Common Stock Account	$ 110,000.00	$ 220,000.00	$ 110,000.00
Additional Paid-in Capital	$ 92,000.00	$ -	$ 92,000.00
Retained Earnings	$ 172,000.00	$ 62,000.00	$ 172,000.00
Total Stockholders' Equity	$ 374,000.00	$ 282,000.00	$ 374,000.00

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