accounting homework

Question

Many types of transactions may affect stockholders' equity.
Identify the effects of the following transactions on total stockholders' equity. Each transaction is independent.
a.

A 10% stock dividend. Before the dividend, 530 comma 000

shares of $1 par value common stock were outstanding; market value was $ 9

at the time of the dividend.
b.

A 2-for-1 stock split. Prior to the split, 62 comma 000

shares of $ 1

par value common stock were outstanding.
c.

Purchase of 1 comma 300

shares of $0.50 par treasury stock at $ 5

per share.
d.

Sale of 200

shares of $0.50 par treasury stock for $ 11

per share. Cost of the treasury stock was $ 2

per share.

Answer 1

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1. The stock dividend will result in issuing 53,000 more shares. They will be recorded together with the existing common stock at $1 per share, and paid-in capital will be recorded at $8 per share (55,000 shares * 8). The retained earnings account will be reduced by the amounts added to common stock and paid-in capital.