Exercise 10-53 Stock Dividend The balance sheet of Cohen Enterprises includes th
ID: 2430414 • Letter: E
Question
Exercise 10-53
Stock Dividend
The balance sheet of Cohen Enterprises includes the following stockholders' equity section:
If required, round your answers to two decimal places.
1. On April 15, 2011, when its stock was selling for $18 per share, Cohen Enterprises issued a small stock dividend. After making the journal entry to recognize the stock dividend, Cohen's total capital stock increased by $270,000. In percentage terms, what was the size of the stock dividend?
%
2. Ignoring the small stock dividend discussed in (1), assume that on June 1, 2011, when its stock was selling for $22 per share, Cohen Enterprises issued a large stock dividend. After making the journal entry to recognize the stock dividend, Cohen's retained earnings decreased by $75,000. In percentage terms, what was the size of the stock dividend?
%
Explanation / Answer
Answers
>After stock dividend, total capital stock increased by $ 270,000
>Small Stock dividend are issued on the basis of market price.
>Market price per share = $ 18
>No. of shares hence issued as stock dividend = 270000 / 18 = 15,000 shares.
>Shares outstanding before Stock dividend = 150,000 shares.
>Size of stock dividend = 15,000 shares / 150,000 shares = 0.1 = 10%.
>After stock dividend, retained earnings decreased by $ 75,000
>Par Value per share = $ 1 [$150,000 / 150,000 shares outstanding and issued]
>No. of shares distributed as Stock dividend = $ 75,000 / $ 1 = 75,000 shares.
>Shares outstanding before Stock dividend = 150,000 shares.
> Size of stock dividend = 75,000 shares / 150,000 shares = 0.5 = 50%
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