Question

In: Accounting

9. A 5% common stock dividend on 2,000 shares outstanding with apar value of $1...

9. A 5% common stock dividend on 2,000 shares outstanding with a par value of $1 was declared. The current market value of the stock is $35/share

For each Financial Transaction below, identify the effect on the Balance Sheet, Income Statement and Statement of Cash Flows. If a transaction does not effect a statement(s), then answer “N/A.” (1/2 point for each of the three statements.)

Identify if the transaction on the statement of cash flows is an Operating activity (OA), Investing activity (IA) or a Financing Activity (FA)

A 5% common stock dividend on 2,000 shares outstanding with a par value of $1 was declared. The current market value of the stock is $35/share.

Assets

=

Liabilities

+

Stockholders' Equity

Stmt of Cash Flows

+

=

+

Common Stock

+

Retained Earnings

REV

-

EXP

-

DIV

Expert Solution

Number of common shares outstanding = 2,000

Stock dividend = 5%

Hence, Number of shares to be issued = 2,000 x 5%

= 100

Current market price of 1 share = $35

Par value of 1 share = $1

Amount to be credited to common stock = 100 x 1

= $100

Amount to be credited to additional paid in capital = 100 x 34

= $3,400

Retained earnings will be debited by = 100 x 35

= $3,500

Assets

=

Liabilities

+

Stockholder's Equity

Statement of Cash flows

+

=

+

Common Stock

+

Additional paid in capital

+

Retained earnings

+

Rev

-

Exp

-

Div

100

+

3,400

-

3,500

NA

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