110. The Squash Company\'s shareholders\' equity on January 1, 2012 was $3,125,5

Question

110. The Squash Company's shareholders' equity on January 1, 2012 was $3,125,500. During 2012, Squash Company reported the following:

• Net income of $575,325.

• Declared cash dividends totaling $125,000; the dividends had not been paid as of December 31, 2012.

• Issued 10,000 shares of $5 par value common stock at $9 per share.

• Purchased 5,000 shares of its common stock for $9.75 per share; the shares are being held as treasury shares.

• Sold 1,500 shares of treasury stock for $9.25 per share.

• Issued 2,000 shares of $5 par value common stock resulting from the declaration of a stock dividend during 2012; the market value of the common stock on the date of declaration was $10.25 per share.

What was shareholders' equity as of December 31, 2012?

Explanation / Answer

Stock Dividend does not involve Cash. It does not effect Stockholders equity because it is issued from retained Earnings. Retained Earning will decrease and Common stock will increase by same amount.

Stockholder's Equity on 1 jan, 2012 $3,125,500.00 Net Income for the year $575,325.00 Cash Dividend Declared -$125,000.00 Issue of 10000 Common Stock of $5 $50,000.00 Paid up capital in excess of Par $40,000.00 5000 Tresuary Stock -$48,750.00 Reissue of 1500 Tresaury Stock $13,875.00 Tota Stockholders Equity $3,630,950.00

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