Question
In: Accounting
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 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. Show the effect on the capital accounts of a two-for-one stock split
|
Common stock |
$2,00,000 |
|
Capital excess of par |
$1,00,000 |
|
Retained earnings |
$5,92,000 |
|
Total equity |
$8,92,000 |
*Common stock= Shares outstanding ×Par value per share=
= (2 ×100,000) ×(0.5 ×$2)= 200,000 ×$1= $2,00,000
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
|
Common stock |
$2,20,000 |
|
Capital excess of par |
$2,00,000 |
|
Retained earnings |
$4,72,000 |
|
Total equity |
$8,92,000 |
Number of new shares = Dividend percent ×Number of shares outstanding
= 100,000 x 0.10 = 10,000 shares
Common stock= Number of shares outstanding ×Par value per share
= (100,000 + 10,000) ×$2= $220,000
Capital in excess of par = Original account balance + [Number of new shares ×(Stock price ?Par value)]
= $100,000 + [10,000 ×($12 ?2)]= $2,00,000
Retained earnings = Original account balance ?(Number of new shares ×Stock price)
= $5,92,000 ? (10,000 ×$12)= $4,72,000
c. Based on the balance in retained earnings, which of the two dividend plans is more restrictive on future cash dividends?
Stock dividend Plan
ekkarill92 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
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Total
assets
$
1,360,000
Liabilities
Accounts payable
$
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Notes payable
55,000
Common stock (100,000
shares @ $4 par)
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Capital in excess of
par
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Retained earnings
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Total
liabilities & owners' equity
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The firm’s stock sells for $12 a share.
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calculations...
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$
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Accounts receivable
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Fixed assets
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Total assets
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Liabilities
Accounts payable
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262,000
Notes payable
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Common stock (130,000 shares @ $2 par)
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Capital in excess of par
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Retained earnings
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Total liabilities & owners' equity
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calculations...
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Squash Delight Inc. has the following balance sheet:
Assets
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90,000
Accounts receivable
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Fixed assets
782,000
Total assets
$
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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.
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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
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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
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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.
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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
................................................................................
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Inventory
..................................................................................................
10,000
Supplies
...................................................................................................
200
Total
assets..............................................................................................
$69,700
Liabilities and Stockholders’ Equity
Liabilities: Accounts payable
.............................................................................
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Salaries payable
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1,000 Income
taxes payable
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3,675
Total
liabilities..........................................................................................
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Stockholders’ equity: Capital stock (10,000 shares
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Total stockholders’ equity
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Total liabilities and stockholders’
equity................................................ $69,700
SMC, Inc. Income Statement For the Year Ended
December31,2017
Sales revenue
.............................................................................................
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Southwestern Wear Inc. has the following balance sheet: Current
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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
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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...
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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
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