Latent Enterprises had a very good year in 2007. On Jan 21,2008, they declared a
ID: 2434029 • Letter: L
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Latent Enterprises had a very good year in 2007. On Jan 21,2008, they declared a cash dividend of $0.20 per share onoutstanding shares of 250000. This dividend was paid on Feb 28 toall shareholders. On June 20, they declared a stock dividend of 5percent. Finally, on Sept 1, they declared a 2 for 1 stock splitwhen the market price was $250. On dec 31, they closed theirbooks. A) Prepare the journal entries that corresponds to theparagraph. B) Explain the effect of cash dividends, stock dividends, andstock splits on retained earnings. C) Calculate the shares outstanding at the end ofSeptember. D) using the correct format, Prepare the Statement ofretained Earnings and the shareholders' Equity section of thebalance Sheet for year-end Dec 31,2008. retained earnings on Jan 1,2008 were $148000 and shareholders' equity was $5000000 ... I will really apprecaite if anyone can help me out with thisasap...I will give them the highest points Latent Enterprises had a very good year in 2007. On Jan 21,2008, they declared a cash dividend of $0.20 per share onoutstanding shares of 250000. This dividend was paid on Feb 28 toall shareholders. On June 20, they declared a stock dividend of 5percent. Finally, on Sept 1, they declared a 2 for 1 stock splitwhen the market price was $250. On dec 31, they closed theirbooks. A) Prepare the journal entries that corresponds to theparagraph. B) Explain the effect of cash dividends, stock dividends, andstock splits on retained earnings. C) Calculate the shares outstanding at the end ofSeptember. D) using the correct format, Prepare the Statement ofretained Earnings and the shareholders' Equity section of thebalance Sheet for year-end Dec 31,2008. retained earnings on Jan 1,2008 were $148000 and shareholders' equity was $5000000 ... I will really apprecaite if anyone can help me out with thisasap...I will give them the highest pointsExplanation / Answer
Jan 21 RetainedEarnings 50,000 DividendPayable 50,000 (250,000*$0.2) Feb 28 DividendPayable 50,000 Cash 50,000 June 20 RetainedEarnings 12,500 DividendPayable 12,500 (250,000*$0.05) B) Cash dividends will reduce the retained earnings since it givingback the profit to the stockholders. Stock dividends also have the effect toreduce the retained earnings, but the total stockholder's equityremained the same. Stock splits don't have any effect to theretained earnings and stockholder's equity. However, the par valueof the stock will reduce. C) 250,000*2 = 500,000 of outstanding shares D) Statement of Retainedearnings Beginning balance, Jan 1,2008 148,000 Less:Dividends ( 62,500) Ending balance, Dec31,2008 85,500 Balance Sheet(Partial) Stockholder's Equity Paid inCapital 4,852,000 RetainedEarnings 85,500 Total Stockholder'sequity 4,937,500
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