Question

In: Accounting

Stock Dividends The Stockholders' Equity section of Merriwether Corp.'s balance sheet as of January 1, 2017,...

Stock Dividends

The Stockholders' Equity section of Merriwether Corp.'s balance sheet as of January 1, 2017, appeared as follows:

Common stock, $10 par, 49,000 shares issued and outstanding $490,000
Additional paid-in capital 100,000
Retained earnings 400,000
Total stockholders' equity $990,000

The following transactions occurred during 2017:

  1. Declared a 10% stock dividend to common stockholders on January 15. At the time of the dividend, the common stock was selling for $30 per share. The stock dividend was to be issued to stockholders on January 30, 2017.
  2. Distributed the stock dividend to the stockholders on January 30, 2017.

Required:

1. Identify and analyze the effect of each transaction.

a. Declared a 10% stock dividend to common stockholders on January 15. At the time of the dividend, the common stock was selling for $30 per share. The stock dividend was to be issued to stockholders on January 30, 2017.

b. Distributed the stock dividend to the stockholders on January 30, 2017.

Activity
  • Operating
  • Investing
  • Financing
  • Financing and Investing
  • Financing and Operating
Accounts
  • Common Stock Dividend Distributable Increase, Common Stock Increase
  • Common Stock Dividend Distributable Increase, Common Stock Decrease
  • Common Stock Dividend Distributable Decrease, Common Stock Increase
  • Common Stock Dividend Distributable Decrease, Common Stock Decrease
Statement(s)
  • Balance Sheet only
  • Income Statement only
  • Balance Sheet and Income Statement

2. Develop the Stockholders' Equity category of Merriwether Corp.'s balance sheet as of January 31, 2017, after the stock dividend was issued.

Merriwether Corp.
Partial Balance Sheet
January 31, 2017
Stockholders' equity
  • Common stock
  • Common stock dividend distributable
  • Common stock, $10 par, 53,900 shares issued and outstanding
 $
  • Additional paid-in capital-common stock
  • Common stock
  • Common stock dividend distributable
  • Common stock
  • Common stock dividend distributable
  • Retained earnings
Total stockholders' equity $

Feedback

These transactions

  • increase
  • decrease
  • did not change

total stockholders' equity. They reclassified some equity from the

  • retained earnings
  • contributed capital

category to the

  • retained earnings
  • contributed capital

category.

Solutions

Expert Solution

These transactions did not change the total stockholders' equity. They reclassified some retained earnings from the retained earnings to contributed capital category.

ekkarill92 answered 1 year ago
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