Question

Peterson Co.’s shareholder equity and the percentage of an upcoming stock dividend.

Peterson is considering either a 34% stock dividend or a 7% stock dividend.

Insert the total equity amount here. (The company is using the cost method for treasury stock.):

$__________________________________.

Set up cell C16 on P1 so that it AUTOMATICALLY displays the word “Small” or the word “Large” as appropriate to describe the stock dividend (the IF function would accomplish this). Assume a small stock dividend is less than 25%.

Insert the Retained Earnings amount here:

$___________________________________ (% = 34%)

Total each of the columns. Note the total of the “Effect” column should be zero.

	Peterson Co.
	Shareholder Equity
			Stock Dividend	Adjusted
	Description	Amount in $	Effect	Amount
	Subtotal
	less Treasury stock
	Total shareholder equity
	Stock Dividend		Large
	Use this percentage
	No. of common shares outstanding
	No. of new shares
	Debit R/E using amount per share

Information
Market value of common stock	$16.33	per share
No. of common shares in treasury	19,745
No. of common shares issued	142,886
Paid in capital, excess of par	$1,789,653
Par value of common stock	$2.75	per share
Price paid for shares in the treasury	$8.96	per share
Retained earnings	$1,047,886
Stock dividend	34%

Answer 1

Peterson Co.

Shareholder's equity

Stock dividend

Adjusted

Description

Amount in $

Effect

Amount

In case of 7% stock dividend (Note:1)

Small

Common stock

(142886*2.75)

392936.5

27505.5

420442

Paid in capital, excess of par

1789653

135827.2

1925480

Retained earnings

1047886

-163332.70

884553.3

3230475.5

3230476

Less: Treasury stock (19745*8.96)

176915.2

176915.2

Shareholder's equity

3053560.3

0

3053560.3

Note:1

7% stock dividend issued

Number of additional shares to be issues=Number of common shares*Stock dividend %=142886*7%=10002.02=10002 shares

Entry :

Debit

Credit

Retained earnings

(10002*16.33)

163332.7

Common stock

(10002*2.75)

27505.5

Paid in capital, excess of par

135827.16

Peterson Co.

Shareholder's equity

Stock dividend

Adjusted

Description

Amount in $

Effect

Amount

In case of 7% stock dividend (Note:1)

Large

Common stock

(142886*2.75)

392936.5

133597.75

526534.3

Paid in capital, excess of par

1789653

1789653

Retained earnings

1047886

-133597.75

914288.3

3230475.5

3230476

Less: Treasury stock (19745*8.96)

176915.2

176915.2

Shareholder's equity

3053560.3

0

3053560.3

Note:1

34% stock dividend issued

Number of additional shares to be issues=Number of common shares*Stock dividend %=142886*34%=48581.24=48581 shares

Entry :

Debit

Credit

Retained earnings

(48581*2.75)

133597.75

Common stock

(48581*2.75)

133597.75

Formula for computing small or large stock dividend:

Assume Cell C16 contains % of stock dividend

Then our wquation will be =If (C16<25%,"Small","Large")

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