11b-1 : One is the template and the other is the question it that A FIRM had pre
ID: 2531654 • Letter: 1
Question
11b-1 : One is the template and the other is the question
it that A FIRM had preferred stock outstanding, the EPS calculations are modified slightly. In this case, the amount of preferred dividend is subtracted from income prior to making the is not done when calculating the fully diluted EPS since conversion to common stock would eliminate the preferred dividend. EPS calculation. This Problems for Section 11B 11B-1..On January 4 KATIE Incorporated has the following balances in its owners' equity accounts: RETAINED EARN COM ST ($4 par) . APIC-COMMON- 98000 80000 60000 a. On that date KATIE announces and distributes a 8% stock dividend. At this point in time the market price of the stock is $24 per share. Show the necessary accounting entries. b. Show the necessary accounting entries if KATIE had announced and distributed a 40% stock dividend on January 4 instead of the small stock dividend discussed in a. Chapter 11 Section BExplanation / Answer
Answers
8% stock dividend is declared and distributed.
Common Stock = $80,000 ($4 par) = 80000 / 4 = 20,000 shares
No. of shares distributable as dividend = 20,000 x 8% = 1600 shares
1600 shares will be distributed at Market price of $24 per shares [Case of small stock dividend]
1600 shares x $4 par = $6400 [Common Stock]
1600 shares x $20 = $32,000 [APIC-Common Stock]
Total Dividend = 1600 shares x $24 = $38,400 [6400 + 32000]
Dividend
Common Stock
$ 6,400.00
Retained earnings
$ 38,400.00
Additional Paid in Capital - Common Stock
$ 32,000.00
Total
$ 38,400.00
Total
$ 38,400.00
Retained earnings
Dividends
$ 38,400.00
Beginning balance
$ 98,000.00
Ending balance
$ 59,600.00
Total
$ 98,000.00
Total
$ 98,000.00
Common Stock ($4 par)
Ending balance
$ 86,400.00
Beginning balance
$ 80,000.00
Dividend
$ 6,400.00
Total
$ 86,400.00
Total
$ 86,400.00
Additional Paid in Capital - Common Stock
Ending balance
$ 92,000.00
Beginning balance
$ 60,000.00
Dividend
$ 32,000.00
Total
$ 92,000.00
Total
$ 92,000.00
When Large Stock dividend is declared and distributed, market value per share becomes irrelevant as in this case. Here 40% stock dividend is declared and distributed.
Common Stock $80,000 at $4 par = 20000 shares
Stock dividend = 20000 shares x 40% = 8000 shares.
These shares will be issued at par Value of $4
Amount of dividend = 8000 shares x $4 = $32,000
Dividend
Common Stock
$ 32,000.00
Retained earnings
$ 32,000.00
Total
$ 32,000.00
Total
$ 32,000.00
Retained earnings
Dividends
$ 32,000.00
Beginning balance
$ 98,000.00
Ending balance
$ 66,000.00
Total
$ 98,000.00
Total
$ 98,000.00
Common Stock ($4 par)
Ending balance
$ 1,12,000.00
Beginning balance
$ 80,000.00
Dividend
$ 32,000.00
Total
$ 1,12,000.00
Total
$ 1,12,000.00
Additional Paid in Capital - Common Stock
Ending balance
$ 60,000.00
Beginning balance
$ 60,000.00
Total
$ 60,000.00
Total
$ 60,000.00
Dividend
Common Stock
$ 6,400.00
Retained earnings
$ 38,400.00
Additional Paid in Capital - Common Stock
$ 32,000.00
Total
$ 38,400.00
Total
$ 38,400.00
Retained earnings
Dividends
$ 38,400.00
Beginning balance
$ 98,000.00
Ending balance
$ 59,600.00
Total
$ 98,000.00
Total
$ 98,000.00
Common Stock ($4 par)
Ending balance
$ 86,400.00
Beginning balance
$ 80,000.00
Dividend
$ 6,400.00
Total
$ 86,400.00
Total
$ 86,400.00
Additional Paid in Capital - Common Stock
Ending balance
$ 92,000.00
Beginning balance
$ 60,000.00
Dividend
$ 32,000.00
Total
$ 92,000.00
Total
$ 92,000.00
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.