Question

Use the following information to answer the next __3__ questions.

Clover Leaf Auto Parts had 500,000 shares of common stock authorized when it started business Jan. 1, 2016. During 2016 the following transactions occurred.

      January 1     Sold 300,000 shares of common stock.

      April 1        Issued 10,000 new shares of common stock.

      July 1          Declared and issued a 10% stock dividend.

      August 1      Purchased 6,000 shares of treasury stock.

10. How many new shares of common stock were issued in the July 1 stock dividend? and at what dollar amount per share would the shares be recorded?

            Number of Shares            Dollar amount

      a.       30,000 shares                    par value

      b.      31,000            shares               market value

      c.       30,000 shares               market value    

      d.      80,000 shares                   par value

11. At December 31, 2016, how many shares of common stock were issued? and how many outstanding?

            Shares Issued                  Shares Outstanding

      a.        331,000                            325,000           

      b.       310,000                           304,000

      c.       890,000                            884,000

      d.       341,000                           335,000

Answer 1

Solution:

Question 10.

Stock Dividends represents the distribution of retained earnings to investors in the form of additional shares in the company instead of cash.

Number of Shares Issued in Stock Dividend = Number of Shares Outstanding as on Stock Dividend Date x Stock Dividend Percentage

Number of Shares Outstanding on stock dividend date = 300,000 Shares Issued on Jan 1 + 10,000 New Shares Issued on April 1 = 310,000 Shares

Total Number of Shares outstanding as on stock dividend date = 310,000 Shares

Number of Shares Issued in Stock Dividend = 310,000 Shares Outstanding as on Stock Dividend Date x Stock Dividend Percentage 10%

= 31,000 Shares

Number of Shares issued in stock dividend = 31,000 Shares

The shares of stock dividend would be recorded at market value.

Hence, the correct answer is b. 31,000 Shares at Market Value

Question 11 –

At December 31, 2016,

The Number of Shares Issued = Jan 1 Issue Shares 300,000 + April 1 Issue Shares 10,000 + July 1 Stock Dividend Shares 31,000

= 341,000 Shares

The Number of Shares Outstanding = Total Number of Shares Issued – Treasury Stock Shares

= 341,000 Shares – 6,000 Shares of Treasury Stock

= 335,000 shares

Hence, the Correct option is d. Shares Issued 341,000 Shares and Shares Outstanding 335,000 Shares

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