Question

Listed below are the transactions that affected the shareholders’ equity of Branch-Rickie Corporation during the period 2018–2020. At December 31, 2017, the corporation’s accounts included:

	($ in 000s)
Common stock, 118 million shares at $1 par	$	118,000
Paid-in capital—excess of par		708,000
Retained earnings		970,000

November 1, 2018, the board of directors declared a cash dividend of $0.60 per share on its common shares, payable to shareholders of record November 15, to be paid December 1.

On March 1, 2019, the board of directors declared a property dividend consisting of corporate bonds of Warner Corporation that Branch-Rickie was holding as an investment. The bonds had a fair value of $3.4 million, but were purchased two years previously for $3.0 million. Because they were intended to be held to maturity, the bonds had not been previously written up. The property dividend was payable to shareholders of record March 13, to be distributed April 5.

On July 12, 2019, the corporation declared and distributed a 6% common stock dividend (when the market value of the common stock was $17 per share). Cash was paid in lieu of fractional shares representing 80,000 equivalent whole shares.

On November 1, 2019, the board of directors declared a cash dividend of $0.60 per share on its common shares, payable to shareholders of record November 15, to be paid December 1.

On January 15, 2020, the board of directors declared and distributed a 3-for-2 stock split effected in the form of a 50% stock dividend when the market value of the common stock was $18 per share.

On November 1, 2020, the board of directors declared a cash dividend of $0.45 per share on its common shares, payable to shareholders of record November 15, to be paid December 1.

Question:

Prepare comparative statements of shareholders’ equity for Branch-Rickie for the three-year period. Net income was $420 million, $485 million, and $545 million for 2018, 2019, and 2020, respectively.

Answer 1

Branch-Rickie Corporation
Statement of Shareholders' Equity
For the Years Ended Dec 31, 2018, 2019 & 2020 ($ in'000)
	Common Stock	Additional Paid-in Capital	Retained Earnings	Total Shareholders' Equity
Jan 1, 2018	118,000.00	708,000.00	970,000.00	1,796,000.00
Cash Dividends	-	-	(70,800.00)	(70,800.00)
Net Income	-	-	420,000.00	420,000.00
Dec 31, 2018	118,000.00	708,000.00	1,319,200.00	2,145,200.00
Property Dividends	-	-	(3,400.00)	(3,400.00)
Stock Dividend	7,000.00	112,000.00	(120,360.00)	(1,360.00)
Cash Dividends	-	-	(75,000.00)	(75,000.00)
Net Income	-	-	485,000.00	485,000.00
Dec 31, 2019	125,000.00	820,000.00	1,605,440.00	2,550,440.00
3 for 2 Split effected in the form of stock divdends	62,500.00	(62,500.00)		-
Cash Dividends	-	-	(84,375.00)	(84,375.00)
Net Income			545,000.00	545,000.00
Dec 31, 2020	187,500.00	757,500.00	2,066,065.00	3,011,065.00
2018
Cash Dividends = 118,000,000 X $0.60 = $70,800,000
2019
Stock Dividends
No. of Share to be issued as Stock Dividend = 118,000 X 6% = 7,080,000
No. of share issued = 7,080,000 -80,000 = 7,000,000 shares
Total Amount of stock Dividend = 7,080,000 X $17 = $120,360,000
Common Stock = 7,000,000 Shares X $1 = $7,000,000
Paid-in Capital in Excess of Par = 7,000,000 X $16 = $112,000,000
2020
Stock Dividends = 125,000,000 Shares x 50% X $1 = $62,500,000
Cash Dividends = 187,500,000 Shares X $0.45 = $84,375,000