Question
In: Finance
Squash Delight Inc. has the following balance sheet: Assets Cash $ 30,000 Accounts receivable 317,000 Fixed...
Squash Delight Inc. has the following balance sheet:
| Assets | ||
| Cash | $ | 30,000 |
| Accounts receivable | 317,000 | |
| Fixed assets | 862,000 | |
| Total assets | $ | 1,209,000 |
| Liabilities | ||
| Accounts payable | $ | 262,000 |
| Notes payable | 56,000 | |
| Common stock (130,000 shares @ $2 par) | 260,000 | |
| Capital in excess of par | 100,000 | |
| Retained earnings | 531,000 | |
| Total liabilities & owners' equity | $ | 1,209,000 |
The firm’s stock sells for $12 a share.
a. Show the effect on the capital accounts of a two-for-one stock split. (Do not round intermediate calculations and round your answers to the nearest whole dollar.)
b. Show the effect on the capital accounts of a 10 percent stock dividend. Part b is separate from part a. In part b, do not assume the stock split has taken place. (Do not round intermediate calculations and round your answers to the nearest whole dollar.)
c. Based on the balance in retained earnings, which of the two dividend plans is more restrictive on future cash dividends?
-
Stock split
-
Stock dividend
Solutions
Expert Solution
a. A stock split does not affect the monetary values in the capital accounts or the balance sheet. After the stock split, the par value of the stock will be reduced to $1 and number of shares will be increased to 260,000
b. Stock dividends will be paid out from Retained earnings
c) In case of stock splits, the balance of retained earnings remains the same at $531,000. But in case of stock dividends, the blance of retained earnings is reduced to $375,000.
So Stock dividends are more restrictive on future cash dividends compared to stock splits
jeff jeffy answered 1 year agoRelated Solutions
Squash Delight Inc. has the following balance sheet: Assets Cash $ 30,000 Accounts receivable 350,000 Fixed...
Squash Delight Inc. has the following balance sheet:
Assets
Cash
$
30,000
Accounts
receivable
350,000
Fixed assets
980,000
Total
assets
$
1,360,000
Liabilities
Accounts payable
$
295,000
Notes payable
55,000
Common stock (100,000
shares @ $4 par)
400,000
Capital in excess of
par
100,000
Retained earnings
510,000
Total
liabilities & owners' equity
$
1,360,000
The firm’s stock sells for $12 a share.
a. Show the effect on the capital accounts of a
two-for-one stock split. (Do not round intermediate
calculations...
Squash Delight Inc. has the following balance sheet: Assets Cash $ 55,000 Accounts receivable 275,000 Fixed...
Squash Delight Inc. has the following balance sheet:
Assets
Cash
$
55,000
Accounts
receivable
275,000
Fixed assets
870,000
Total
assets
$
1,200,000
Liabilities
Accounts payable
$
250,000
Notes payable
58,000
Common stock (100,000
shares @ $2 par)
200,000
Capital in excess of
par
100,000
Retained earnings
592,000
Total
liabilities & owners' equity
$
1,200,000
The firm’s stock sells for $12 a share.
a. Show the effect on the capital accounts of a
two-for-one stock split. (Do not round intermediate
calculations...
Squash Delight Inc. has the following balance sheet: Assets Cash $ 90,000 Accounts receivable 307,000 Fixed...
Squash Delight Inc. has the following balance sheet:
Assets
Cash
$
90,000
Accounts receivable
307,000
Fixed assets
782,000
Total assets
$
1,179,000
Liabilities
Accounts payable
$
284,000
Notes payable
51,000
Common stock (100,000 shares @ $4 par)
400,000
Capital in excess of par
100,000
Retained earnings
344,000
Total liabilities & owners'
equity
$
1,179,000
The firm’s stock sells for $10 a share.
a. Show the effect on the capital accounts of a
two-for-one stock split. (Do not round intermediate
calculations...
Squash Delight Inc. has the following balance sheet: Assets Cash $ 60,000 ' Accounts receivable 287,000...
Squash Delight Inc. has the following balance sheet:
Assets
Cash $ 60,000 '
Accounts receivable 287,000
Fixed assets 775,000
Total assets $ 1,122,000
Liabilities
Accounts payable $ 275,000
Notes payable 53,000
Common stock (120,000 shares @ $2 par) 240,000
Capital in excess of par 100,000
Retained earnings 454,000
Total liabilities & owners' equity $ 1,122,000 The firm’s
stock sells for $10 a share.
a. Show the effect on the capital accounts of a two-for-one
stock split. (Do not round intermediate...
Squash Delight Inc. has the following balance sheet: cash $45,00 Account receivable $295,000. fix assets 772,000....
Squash Delight Inc. has the following balance
sheet:
cash $45,00 Account receivable $295,000. fix assets 772,000. total
$1,112 000
Liabilities
Account payable $296 000, Note payable 54 000, Common stock
(100,000 share, @$2 par) 200 000. Capital in excess of par 100,000,
Retained earnings 462 000. Total liabilities & owner's equity
$1,112,000. The Firm's stock sells for $14 a share.
a. show the effect on the capital account of a
two-for-one stock split.
b. show the effect on the capital...
SMC, Inc. Balance Sheet December 31, 2017 Assets Cash ......................................................................................................... $34,500 Accounts receivable ...................................................................
SMC, Inc. Balance Sheet December 31, 2017
Assets Cash
.........................................................................................................
$34,500
Accounts receivable
................................................................................
25,000
Inventory
..................................................................................................
10,000
Supplies
...................................................................................................
200
Total
assets..............................................................................................
$69,700
Liabilities and Stockholders’ Equity
Liabilities: Accounts payable
.............................................................................
$12,000
Salaries payable
...............................................................................
1,000 Income
taxes payable
......................................................................
3,675
Total
liabilities..........................................................................................
$16,675
Stockholders’ equity: Capital stock (10,000 shares
outstanding).................................... $25,000
Retained earnings
............................................................................
28,025
Total stockholders’ equity
.......................................................................
53,025
Total liabilities and stockholders’
equity................................................ $69,700
SMC, Inc. Income Statement For the Year Ended
December31,2017
Sales revenue
.............................................................................................
Southwestern Wear Inc. has the following balance sheet: Current assets $1,875,000 Accounts payable $375,000 Fixed assets...
Southwestern Wear Inc. has the following balance sheet: Current
assets $1,875,000 Accounts payable $375,000 Fixed assets 1,875,000
Notes payable 750,000 Subordinated debentures 750,000 Total debt
$1,875,000 Common equity 1,875,000 Total assets $3,750,000 Total
liabilities and equity $3,750,000 The trustee's costs total
$238,250, and the firm has no accrued taxes or wages. Southwestern
has no unfunded pension liabilities. The debentures are
subordinated only to the notes payable. If the firm goes bankrupt
and liquidates, how much will each class of investors...
Southwestern Wear Inc. has the following balance sheet: Current assets $1,875,000 Accounts payable $375,000 Fixed assets...
Southwestern Wear Inc. has the following balance sheet:
Current assets
$1,875,000
Accounts payable
$375,000
Fixed assets
1,875,000
Notes payable
750,000
Subordinated debentures
750,000
Total debt
$1,875,000
Common equity
1,875,000
Total assets
$3,750,000
Total liabilities and equity
$3,750,000
The trustee's costs total $263,750, and the firm has no accrued
taxes or wages. Southwestern has no unfunded pension liabilities.
The debentures are subordinated only to the notes payable. If the
firm goes bankrupt and liquidates, how much will each class of
investors...
Southwestern Wear Inc. has the following balance sheet: Current assets $1,875,000 Accounts payable $375,000 Fixed assets...
Southwestern Wear Inc. has the following balance sheet:
Current assets
$1,875,000
Accounts payable
$375,000
Fixed assets
1,875,000
Notes payable
750,000
Subordinated debentures
750,000
Total debt
$1,875,000
Common
equity 1,875,000
Total assets
$3,750,000
Total liabilities and equity
$3,750,000
The trustee's costs total $323,750, and the firm has no accrued
taxes or wages. Southwestern has no unfunded pension liabilities.
The debentures are subordinated only to the notes payable. If the
firm goes bankrupt and liquidates, how much will each class of
investors receive...
Southwestern Wear Inc. has the following balance sheet: Current assets $1,875,000 Accounts payable $375,000 Fixed assets...
Southwestern Wear Inc. has the following balance sheet:
Current assets
$1,875,000
Accounts payable
$375,000
Fixed assets
1,875,000
Notes payable
750,000
Subordinated debentures
750,000
Total debt
$1,875,000
Common equity
1,875,000
Total assets
$3,750,000
Total liabilities and equity
$3,750,000
The trustee's costs total $248,500, and the firm has no accrued
taxes or wages. Southwestern has no unfunded pension liabilities.
The debentures are subordinated only to the notes payable. If the
firm goes bankrupt and liquidates, how much will each class of
investors...
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