Required : a . Use a financial statement effects template to record the three tr

Question

Required:
a. Use a financial statement effects template to record the three transactions.
b. How did the cash dividend affect the company's profitability for the year? What effect does the stock split have on Dynegy's financial statements and the effects does the stock split have on an individual stockholders?

3. The following information is from 2013 statement of stockholders' equity for Dynegy, Inc. 2013 2012 Stockholders' equity (in millions, except shares Common stock, par value $0.01 (100,202,036 shares issued 2013; 99,999,196 shares issued 2012) Additional paid-in capital Accumulated other comprehensive income, net of tax Accumulated deficit Total Dynegy stockholders' equity Noncontrolling interest Total Equity 2,614 58 463 2,210 3 $2,207 2,598 107 2,503 0 $2,503 Dynegy has 420 million shares of common stock authorized. Assume the following transactions occurred during the 2014. Mar 10 May 6 Aug 25 Declare and pay a cash dividend of $1.75 per share Split stock 2-for-1 reducing the par value of the stock to $0.005 Issue a large stock dividend of 80% of the outstanding shares of common stock

Explanation / Answer

a.

Dividendpayout = 100202036*1.75 = 175 Million

Stockholders Equity

Common Stock , par value $ 0.01

1

(100,202,036 shares issued)

Additional paid-in Capital

2439

Accumulated other Comprehensive Income , net of tax

58

Accumulated Deficit

(463)

Total Dynergy Stockholders Equity

2035

Non Controllling Interest

(3)

Total Equity

2032

2.

2014

Stockholders Equity

Common Stock , par value $ 0.005

1

(200404072 shares issued)

Additional paid-in Capital

2439

Accumulated other Comprehensive Income , net of tax

58

Accumulated Deficit

-463

Total Dynergy Stockholders Equity

2035

Non Controllling Interest

-3

Total Equity

2032

3.

Total Outstanding shares = 200404072+ 160323258 = 360727330

Total Value = 360727330*0.005 = 1.80 M

2014

Stockholders Equity

Common Stock , par value $ 0.005

1.8

(360727330 shares issued)

Additional paid-in Capital

2439

Accumulated other Comprehensive Income , net of tax

58

Accumulated Deficit

-463

Total Dynergy Stockholders Equity

2035.8

Non Controllling Interest

-3

Total Equity

2032.8

b. Cash dividend doesn’t impact the profitability as the cash dividends are paid out of company’s profit. On account of stock split, number of outstanding shares in the financial statements would go up and along with it, the stock price will also decrease. As far as individuals are concerned, post stock split, they will be having higher number of shares,in this case, double of what they were possessing earlier. Anybody possessing 100 shares will be having 200 shares post stock split. But the value of stock would remain the same.

Stockholders Equity

2014

Common Stock , par value $ 0.01

1

(100,202,036 shares issued)

Additional paid-in Capital

2439

Accumulated other Comprehensive Income , net of tax

58

Accumulated Deficit

(463)

Total Dynergy Stockholders Equity

2035

Non Controllling Interest

(3)

Total Equity

2032

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