Determine the effect of each of the dividends on the assets, liabilities, and sh

Question

Determine the effect of each of the dividends on the assets, liabilities, and shareholders’ equity of the company at each of the specified dates. (Indicate the direction of the effect by selecting increase, decrease, no effect from the dropdown menu.)

Average Corporation has the following shares outstanding at the end of 2013:    Preferred shares, $3, no par value; 8,000 outstanding shares     Common shares, no par value; 30,000 outstanding shares. On October 1, 2014, the board of directors declared dividends as follows:     Preferred shares: Full dividend amount, payable December 20, 2014     Common shares: 10 percent common stock dividend (i.e., one additional share for each 10 held),    issuable December 20, 2014 On December 20, 2014, the market prices were $50 per preferred share and $32 per common share.

Explanation / Answer

Note : common stock dividend wouuld reduce Retained Earning & increases Common Stock Dividend distributable account & Additional Paid in capital in which net effect would be no effect in shareholders equity, Its an contra entry

Asset Liabilities shareholders’ equity October 1, 2014 ,Preferred shares: Full dividend amount, payable December 20, 2014 no effect Increase Decrease October 1, 2014, Common shares: 10 percent common stock dividend no effect no effect no effect December 20, 2014 , Prefered Stock Dividend Paid Decrease Decrease no effect December 20, 2014 common stock dividend issued no effect no effect no effect

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