Question

How much does the company's 2019 stockholders' equity change by for each transaction? If the transaction decreases total equity include a - sign in front of your number. If it increases total equity put a + in front of your number.

Do not include any dollar signs. For example, +1,000 if total equity increases and -1,000 if total equity decreases. If no impact then just write '0'. Answers with no "+" or "-" sign in front of them will be counted as incorrect! (Except for if there is no impact, then just write 0.)

The company reported a net loss of $10,000

Declared a cash dividend of $3,000 for 2019 and paid $4,000 related to a cash dividend declared in 2018.

Declared and distributed a 20% stock dividend with a market value of $20,000 and a par value of $1,000

Resold treasury stock for $10,000 that it had purchased in 2018 for $12,000.

Answer 1

1)

A net loss of $10000 would reduce Retained Earnings.

Decrease in Retained Earnings would decrease Stockholders’ Equity by -$10000

Effect on Stockholders’ Equity = -$10000

2)

A declaration of cash Dividend of $3000 would reduce Retained Earnings.

Decrease in Retained Earnings would decrease Stockholders’ Equity by -$3000.

Payment of Cash Dividend for dividend declared in 2018 won’t affect Stockholders’ Equity.

Effect on Stockholders’ Equity = -$3000

3)

A declaration of Stock Dividend would reduce Retained Earnings by the Value of Stock Dividend declared on Market Value.

Stock Dividend declared = $20000 * 20%

Stock Dividend declared = $4000

Effect on Stockholders’ Equity = -$4000

4)

As the Treasury Stock is resold at the price lower than the purchase price of Treasury Stock by $2000, this would decrease Additional Paid-in Capital, Treasury Stock by -$2000.

Effect on Stockholders’ Equity = -$2000