Exercise 12.7 Cash dividends, stock dividends, and share splits L.O. 4 HiTech Manufacturing Company has 1,000,000...

Exercise 12.7 Cash dividends, stock dividends, and share splits L.O. 4

HiTech Manufacturing Company has 1,000,000 shares of $1 par value share capital outstanding on January 1. The following equity transactions occurred during the current year:

Apr. 30	Distributed additional shares capital in a 2-for-1 share split. Market price of shares was $36 per share.
June 1	Declared a cash dividend of $0.96 per share.
July 1	Paid the $0.96 cash dividend to shareholders.
Aug. 1	Declared a 5 percent stock dividend. Market price of share was $19 per share.
Sept. 10	Issued shares resulting from the 5 percent stock dividend declared on August 1.

a.	Prepare journal entries to record the above transactions. (Omit the "$" sign in your response.)

Date	General Journal	Debit	Credit
June 1	(Click to select)CashAdditional paid-in capital: Stock dividendsDividendsRetained earningsCommon stockInterest revenueStock dividend to be distributedDividends payable
	(Click to select)Interest revenueRetained earningsCommon stockDividends payableDividendsStock dividends to be distributedAdditional paid-in capital: Stock dividendsCash

July 1	(Click to select)Common stockInterest revenueDividends payableCashRetained earningsAdditional paid-in capital: Stock dividendsStock dividends to be distributedDividends
	(Click to select)DividendRetained earningsDividends payableCommon stockInterest revenueAdditional paid-in capital: Stock dividendsCashStock dividends to be distributed

Aug. 1	(Click to select)CashRetained earningsDividends payableCommon stockAdditional paid-in capital: Stock dividendsAccounts payableDividendsStock dividends to be distributed
	(Click to select)CashDividends payableDividendsAccounts payableAdditional paid-in capital: Stock dividendsRetained earningsStock dividend to be distributedAccounts receivable
	(Click to select)Dividends payableAdditional paid-in capital: Stock dividendsAccounts payableDividendsCashRetained earningsAccounts receivableStock dividend to be distributed

Sept. 10	(Click to select)Additional paid-in capital: Stock dividendsRetained earningsStock dividend to be distributedDividends payableInterest revenueDividendsCommon stockCash
	(Click to select)Interest revenueAdditional paid-in capital: Stock dividendsDividends payableCommon stockStock dividend to be distributedRetained earningsCashDividends

b.	Compute the number of shares of share capital outstanding at year-end.

Number of shares

shares

c.	What is the par value per share of HiTech Manufacturing share at the end of the year? (Round your answer to 2 decimal places. Omit the "$" sign in your response.)

Par value per share

$

d.	Determine the effect of each of the following on total shareholders' equity: share split, declaration and payment of a cash dividend, declaration and distribution of a share dividend.


Share split	(Click to select)Increase retained earningsDecrease retained earningsNo effect
Declaration / payment of cash dividend	(Click to select)No effectIncrease retained earningsDecrease retained earnings
Declaration / distribution of share dividend	(Click to select)Increase retained earningsNo effectDecrease retained earnings

Expert Solution

ekkarill92 answered 2 years ago

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