HiTech Manufacturing Company has 1,000,000 shares of $1 par value capital stock

Question

HiTech Manufacturing Company has 1,000,000 shares of $1 par value capital stock outstanding on January 1. The following equity transactions occurred during the current year:

Distributed additional shares of capital stock in a 2-for-1 stock split. Market price of stock  was $37 per share.

Declared a 5 percent stock dividend. Market price of stock was $19 per share.

Issued shares resulting from the 5 percent stock dividend declared on August 1.

Determine the effect of each of the following on total stockholders' equity:

stock split, declaration and payment of a cash dividend, declaration and distribution of a stock dividend.

HiTech Manufacturing Company has 1,000,000 shares of $1 par value capital stock outstanding on January 1. The following equity transactions occurred during the current year:

Explanation / Answer

a.

Apr 30 Memorandum:Issued an additional 1000000 shares of capital stocks in a 2-for -1 stock split. par value reduced from $1 to $0.5 per share

June 1 Dividend $840000

Dividend payable $840000

July 1 Dividend payable $840000

Cash $840000

Aug 1 Retained earnings $1900000

Stock dividedn to be distributed $50000

Additional paid-in-capital:stock $1850000

(To record 5% stock dividend consisting of 100000 shares(2000000*5%) of 0.50 par value. market price = $19)

Sep 10 Stock dividend to be distributed $50,000

Common stock $50,000

b. number of shares of capital stock outstanding at year-end = 1000000*2 +100000 = $2,100,000

c. par value per share of HiTech Manufacturing stock at the end of the year = $0.50

d. Stock split - no effect

declaration and payment of a cash dividend = decrease in retained earnings

declaration and distribution of a stock dividend - No effect

Related Questions

Navigate

• Browse (All)
• Browse H
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.