The Western Pipe Company has the following capital section in its balance sheet.

Question

The Western Pipe Company has the following capital section in its balance sheet. Its stock is currently selling for $7 per share. Common stock (30,000 shares at $1 par) Capital in excess of par 30,000 30,000 Retained eamings Total equity 150,000 S 210,000 The firm intends to first declare a 15 percent stock dividend and then pay a 20-cent cash dividend (which also causes a reduction of retained earnings) Show the capital section of the balance sheet after the first transaction and then after the second transaction. (Do not round intermediate calculations and round your answers to the nearest whole dollar.) Western Pipe Co. After Stock Dividend Common stock Capital in excess of par Retained earnings Total equity Western Pipe Co. After Stock Dividend Common stock Capital in excess of par Retained earnings Total equity

Explanation / Answer

After Stock Dividend Common stock, 34500 shares at $1 par 34500 Capital in excess of par 57000 (30000+4500*6) Retained earnings 118500 (150000-4500*7) Total equity 210000 After Cash Dividend Common stock, 34500 shares at $1 par 34500 Capital in excess of par 57000 Retained earnings 111600 (118500-34500*0.20) Total equity 203100

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