In: Finance
Use the following to answer questions 13 - 17
KC Corp.'s management is considering either a 100% stock dividend or a 2-for-1 stock split.
Complete the following chart to assist in answering the following:
13. $_________ After the 100% stock dividend what amount is in Total paid-in capital account?
14. $_________ After the 100% stock dividend what amount is in the retained earnings account?
15. $_________ After the 100% stock dividend what is the par value per share?
16. $_________ After the 2-for-1 stock split what amount is in Total paid in capital account?
17. $ _________ After the 2-for-1 stock split what is the par value per share?
13. Total paid-in capital after 100% stock dividend
Total paid-in capital before 100% stock dividend = $9,200,000
100% Stock dividend issued = Number of shares*par value per share
= 500,000 shares* 0.20
= $100,000
Total paid-in capital after 100% stock dividend = Total paid-in capital before the stock dividend + stock dividend value
= $9,200,000 + $100,000
= $9,300,000
14. Retained earnings after 100% stock dividend
Retained earnings before 100% stock dividend =$1,253,000
Stock dividend value= $100,000
The 100% stock dividend amount will be deducted from the Retained earnings.
Retained earnings after 100% stock dividend = Retained earnings before 100% stock dividend - stock dividend value
= $1,253,000-$100,000
= $1,153,000
15.Par value per share after 100% stock dividend
Since the increase in the total paid-up capital is reduced from the retained earning. There is no change in the par value per share.
Par value per share after 100% stock dividend=$0.20
16. Total paid up capital after 2 for 1 share split
Number of shares after the share split=Number of shares before the share split * split ratio
The common stock after the share split = 1000,000 * $0.10 per share = $100,000
Therefore total paid-in capital after the share split = $9,200,000.
17.Par value per share after the share split
Per value per share after the share split = $0.10 per share.