Identifying and Analyzing Financial Statement Effects of Dividends The stockhold

Question

Identifying and Analyzing Financial Statement Effects of Dividends The stockholders' equity of Hammel Company at December 31, 2016, is shown below. E8-44. 5% preferred stock, $100 par value, 10,000 shares authorized; 6,000 shares issued and outstanding. . . Common stock, $5 par value, 200,000 shares authorized; 600,000 Retained earnings.... Total stockholders' equity.$2,147.000 The following transactions, among others, occurred during 2017. Apr. i Declared and issued a 100% stock dividend on all outstanding shares of common stock. The Dec.7 Declared and issued a 4% stock dividend on all outstanding shares of common stock. The Dec.20 Declared and paid (1) the annual cash dividend on the preferred stock and (2) a cash dividend a. Use the financial statement effects template to indicate the effects of these separate transactions. b. Compute retained earnings for 2017 assuming that the company reports 2017 net income of $523,000 market value of the stock was $14 per share. market value of the stock was $17 per share. of 90 cents per common share.

Explanation / Answer

-(70000*100%*5par value)

-350000

-(140000*.04*17)

-95200

**Preferred dividned : 600000*.05=30000

**common shares outstanding : 70000 beginning +70000 (100%stock dividend) +5600 (140000*.04) = 145600

common stock dividend : 145600*.9= 131040

Total dividend : 30000+131040 = 161040

b)

Balance sheet Transaction Cash asset + Non cash asset = Liabilities + contributed capital + earned capital April 1 +350000

-(70000*100%*5par value)

-350000

Dec 7 +95200

-(140000*.04*17)

-95200

Dec 20 -161040 -161040

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