On January 1, Biofuel Corporation had the following capital structure: Common st

Question

On January 1, Biofuel Corporation had the following capital structure: Common stock ($0.10 par value) Additional paid-in capital Retained earnings Treasury stock Cash flows from financing activities $ 78,000 2,080,000 980,000 28,000 Required: Complete the table below for each of the three following independent cases: Case 1: The board of directors declared and paid a cash dividend of $0.02 per share. Case 2: The board of directors declared and issued a 100 percent stock dividend when the stock was selling at $10 per share. Case 3: The board of directors announced a 2-for-1 stock split. The market price prior to the split was $28 per share. Items Before any Dividend After Cash Dividend After Stock Dividend After Stock Split Common stock account Par per share Shares outstanding Additional paid-in captial Retained earnings Total stockholder's equity Cash flows from financing acitivities

Explanation / Answer

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Items Before any dividend After Cash dividend After Stock dividend After stock split Common Stock 78000 78000 156000 78000 par per share 0.1 0.1 0.1 0.05 Share outstanding 780000 780000 1560000 1560000 Additional Paid-in-capital 2080000 2080000 2080000 2080000 Retained earning 980000 964400 902000 980000 Total Stockholder Equity 3138000 3122400 3138000 3138000 Cash Flow from financing activity 28000 12400 28000 28000 After Cash dividend Cash Dividend 0.02*780000 15600 Cash dividend will reduce retained earning and will be reported as cash flow from financing activity After Stock dividend 100% Stock Dividend 780000*100% 780000 Shares Will increase no of shares by 780000 and reduce Retained Earning by 78000 After stock split Will increase only total no of share which will reduce par value

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