Question

Alexander, Limited, declared and distributed a 10 percent share dividend on its 700,000 shares of outstanding $5 par value ordinary share when the share was selling for $12 per share. The outstanding shares had originally been sold at $8 per share. The balance in retained earnings before the declaration of the share dividend, but after the addition of the current year's net income, was $995,000.

  

Prepare the shareholders' section of Alexander's statement of financial position to reflect these facts. (Omit the "$" sign in your response.)

  

ALEXANDER, LIMITED Shareholders' Equity Section of Statement of Financial Position (Date)
(Click to select)Deferred revenueOffice equipmentAccounts payableOrdinary sharePreferred stock	$
(Click to select)Supplies expenseDepreciaton expensesSales revenueOffice equipmentAdditional paid-in capital on ordinary share
	$
(Click to select)Accounts payableDepreciaton expensesSupplies expenseSales revenueRetained earnings
Total shareholders' equity	$

Answer 1

Shareholders' equity Section of Statement of Financial Position

Common Stock: 3,500,000
Additional paid-in capital-Common Stock: 2,100,000
Retained earnings: 995,000
Total stockholders' equity: 6,595,000

Explanation:

Common Stock: Value of the common stocks at par value. (700,000 * 5 = $ 3,500,000)

Additional paid-in capital-Common Stock: Difference between the paid price by shareholders and par value of the share. The negations made after the issue of the stocks are not taken into account because they don´t include the company. (700,000 * 3 = $ 2,100,000)

Retained Earnings: As the dividend are declared after the end of the accounting year they are not taken into account. So, the retained earnings final balance includes the beginning balance plus the net income of the accountable period which is $ 995,000.

Total stockholders' equity: Common Stock + Additional Paid-in-Capital Common Stock + Retained Earnings