Exercise 11-5 Stock dividends and splits LO P2 On June 30, 2017, Sharper Corpora
ID: 2585811 • Letter: E
Question
Exercise 11-5 Stock dividends and splits LO P2 On June 30, 2017, Sharper Corporation's common stock is priced at $25.00 per share before any stock dividend or split, and the stockholders' equity section of its balance sheet appears as follows Common stock-$10 par value, 65,000 shares authorized, 26,080 shares issued and outstanding Paid-in capital in excess of par value, common stock Retained earnings Total stockholders equity s268,e00 100,000 360,000 s 720,8ee I. Assume that the company declares and immediately distributes a 100% stock dividend. This event is recorded by capitalizing retained earnings equal to the stock's par value, Answer these questions about stockholders' equity as it exists after issuing the new shares a.b.& c. Complete the below table to calculate the retained earnings balance, total stockholders' equity and number of outstanding shares. 2. Assume that the company implements 2-for-1 stock split instead of the stock dividend in part 1 Answer these questions about stockholders' equity as it exists after issuing the new shares ..b.& c. Complete the below table to calculate the retained earnings balance. total stockholders equity and number of outstanding shares Complete this question by entering your answers in the tabs below. Required 1 Required2 Assumethat the company declares and immediately distributes a 100% stock dividend. This event is recorded by capitalizing retained earninas eaual to the stock's oar value. Answer these auestions about stockholders eouitv as it exists after issuinaExplanation / Answer
Solution:
Part 1 --- 100% Stock Dividend
Stock Dividend
Before Stock Dividend
Impact of Stock Dividend
After Stock Dividend
Common Stock
$260,000
260000
$520,000
Pain in capital in excess of par value
$100,000
0
$100,000
Total contributed capital
$360,000
260000
$620,000
Retained Earnings
$360,000
-260000
$100,000
Total Stockholders' Equity
$720,000
0
$720,000
Number of common shares outstanding
26000
26000
52000
Part 2 --- 2 – for – 1 stock split
Note – Stock Split does not increase the value of Common Stock. It will be adjusted or decrease the par Value of the shares. The number of shares increase but the value of common stock not increases and the total stockholder’s equity will remain same.
Stock Dividend
Before Stock Split
Impact of Stock Split
After Stock Split
Common Stock
$260,000
0
$260,000
Pain in capital in excess of par value
$100,000
0
$100,000
Total contributed capital
$360,000
0
$360,000
Retained Earnings
$360,000
0
$360,000
Total Stockholders' Equity
$720,000
0
$720,000
Number of common shares outstanding
26000
26000
52000
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Stock Dividend
Before Stock Dividend
Impact of Stock Dividend
After Stock Dividend
Common Stock
$260,000
260000
$520,000
Pain in capital in excess of par value
$100,000
0
$100,000
Total contributed capital
$360,000
260000
$620,000
Retained Earnings
$360,000
-260000
$100,000
Total Stockholders' Equity
$720,000
0
$720,000
Number of common shares outstanding
26000
26000
52000
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