P11-11 Recording and Comparing Cash Dividends, Stock Dividends, and Stock Splits

Question

P11-11 Recording and Comparing Cash Dividends, Stock Dividends, and Stock Splits LO11-4, 11-6 ,11-8 On January 1, Biofuel Corporation had the following capital structure: Common stock ($0.20 par value) Additional paid-in capital Retained earnings Treasury stock Cash flows from financing activities $64,000 1,940,000 840,000 21,000 Required Complete the table below for each of the three following independent cases Case 1: The board of directors declared 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 $12 per share. Case 3: The board of directors announced a 2-for-1 stock split. The market price prior to the split was $14 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 stockholders equity Cash flows from financing acitivities

Explanation / Answer

Items Before any Dividend Common Stock account $64,000 Par per share $0.20 Shares outstanding 320,000 Additional paid-in cpaital $1,940,000 Retained Earnings $840,000 Total stockholders' equity $2,844,000 Cash flows from financing activities $21,000 Items Calculation After Cash Dividend Common Stock account $64,000 Par per share $0.20 Shares outstanding 320,000 Additional paid-in cpaital $1,940,000 Retained Earnings = $840,000 - ($0.02 x 320,000)    = $840,000 - $6,400                         = $833,600 $833,600 Total stockholders' equity $2,837,600 Cash flows from financing activities = $21,000 - $6,400                           = $14,600 $14,600 Items Calculation After Stock Dividend Common Stock account = $64,000 + $64,000                        = $128,000 $128,000 Par per share $0.20 Shares outstanding = 320,000 + 320,000                       = 640,000 640,000 Additional paid-in cpaital $1,940,000 Retained Earnings = $840,000 - $64,000                       = $776,000 $776,000 Total stockholders' equity $2,844,000 Cash flows from financing activities $21,000 Items Calculation After Stock Split Common Stock account $64,000 Par per share = $0.20 / 2                                          = $0.10 $0.10 Shares outstanding = 320,000 x 2                                    = 640,000 640,000 Additional paid-in cpaital $1,940,000 Retained Earnings $840,000 Total stockholders' equity $2,844,000 Cash flows from financing activities $21,000 Items Before any Dividend After Cash Dividend After Stock Dividend After Stock Split Common Stock account $64,000 $64,000 $128,000 $64,000 Par per share $0.20 $0.20 $0.20 $0.10 Shares outstanding 320,000 320,000 640,000 640,000 Additional paid-in cpaital $1,940,000 $1,940,000 $1,940,000 $1,940,000 Retained Earnings $840,000 $833,600 $776,000 $840,000 Total stockholders' equity $2,844,000 $2,837,600 $2,844,000 $2,844,000 Cash flows from financing activities $21,000 $14,600 $21,000 $21,000

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