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The following information is from 2019 statement of stockholders' equity for Katy Inc. Stockholders' equity (in...

The following information is from 2019 statement of stockholders' equity for Katy Inc.

Stockholders' equity (in millions, except shares)	2016		2015
Series A 5.375% mandatory convertible preferred stock	$ 400		$ 400
Common stock, par value $0.01 (128,626,740 shares issued 2019; 128,228,477 shares issued 2018)	1		1
Additional paid-in capital	3,547		3,187
Accumulated other comprehensive income, net of tax	21		19
Accumulated deficit	(1,927	)	(686	)
Total Dynegy stockholders' equity	2,042		2,921
Noncontrolling interest	(3	)	(2	)
Total equity	$2,039		$2,919

Dynegy has 420 million shares of common stock authorized. Assume the following transactions occurred during the 2019.

Mar 10	Declare and pay a cash dividend of $2.00 per share
May 6	Split stock 2-for-1 reducing the par value of the stock to $0.005
Aug 25	Issue a large stock dividend of 80% of the outstanding shares of common stock

Required:

a.	Use the financial statement effects template below to record the three transactions.
b.	How did the cash dividend affect the company's profitability for the year?
c.	What effects does the stock split have on Dynegy's financial statements?
d.	What effects does the stock split have on an individual stockholder?

Balance Sheet

Income Statement

Transaction

Cash

Asset

+

Noncash Assets

=

Liabil-

ities

+

Contrib.

Capital

+

Earned

Capital

Revenues

–

Expenses

=

Net

Income

Mar 10

=

–

=

May 6

=

–

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Aug 25

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–

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Expert Solution

ekkarill92 answered 3 years ago

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