Question
In: Finance
The owners’ equity accounts for Vidi International are shown here: Common stock ($.40 par value)...
| The owners’ equity accounts for Vidi International are shown here: |
| Common stock ($.40 par value) | $ | 44,000 |
| Capital surplus | 360,000 | |
| Retained earnings | 788,120 | |
| Total owners’ equity | $ | 1,192,120 |
| a-1 | If the company's stock currently sells for $30 per share and a 10 percent stock dividend is declared, how many new shares will be distributed? (Do not round intermediate calculations.) |
| a-2 | Show how the equity accounts would change. (Do not round intermediate calculations.) |
| b-1 | If instead the company declared a 20 percent stock dividend, how many new shares will be distributed? (Do not round intermediate calculations.) |
| b-2 | Show how the equity accounts would change. (Do not round intermediate calculations.) |
Solutions
Expert Solution
a-1)under small stock dividend ,dividend declared are less than 25% of outstanding shares .
The amount debited to retained earning equals to market value of shares declared as sock dividend.
number of shares outstanding : common stock /par value
= 44000/.40
= 110000 shares
stock dividend issued :110000*10%= 11000 shares
Number of shares issued as stock dividend = 11000 shares
a-2)Shares after stock dividend : 110000+11000= 121000
Capital surplus increase by : [30-.40 par value ]*11000= 325600
Retained earning will decrease by : 11000*30 =330000
| common stock (121000*.40) | 48400 |
| capital surplus [360000+325600] | 685600 |
| Retained earning [788120-330000] | 458120 |
| Total owners equity | 1192120 |
b-1)shares issued as stock dividend : 110000*20%= 22000 shares
b-2)
Shares after stock dividend : 110000+22000= 132000 shares
Capital surplus increase by : [30-.40 par value ]*22000= 651200
Retained earning will decrease by : 22000*30 =660000
| common stock (132000*.40) | 52800 |
| capital surplus [360000+651200] | 1011200 |
| Retained earning [788120-660000] | 128120 |
| Total owners equity | 1192120 |
jeff jeffy answered 2 years agoRelated Solutions
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