Recording and calculating stock
My answers are includes can you tell me if they are correct please or where what I'm doing wrong please
On June 30, 2005, Scizzory Corporation’s common stock is priced at $31 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, 60,000 shares
authorized, 25,000 shares issued and outstanding.. . $250,000
Contributed capital in excess of par value, common stock.. . 100,000
Total contributed capital.. . 350,000
Retained earnings.. . 330,000
Total stockholders’ equity.. . $680,000
1. 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. What is the retained earnings balance?
b. What is the amount of total stockholders’ equity?
c. How many shares are outstanding?
2. Assume that the company implements a 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:
a. What is the retained earnings balance?
b. What is the amount of total stockholders’ equity?
c. How many shares are outstanding?
3. Explain the difference, if any, to a stockholder from receiving new shares distributed under a large stock dividend versus a stock split.
answers for the top
Exercise 13-7
1 a. $330,000
b. $680,000
c. 25,000 shares
to a. $ 165,000
b. $ 330,000
c. 12,000
3. The difference between stock splits and large stock dividends is often blurred. Many companies report stock splits in their financial statements without calling in the original shares by simply changing their par value. This type of “split” is really a large stock dividend and results in additional shares issued to stockholders by capitalizing retained earnings or transferring other contributed capital to Common Stock. This approach avoids administrative costs of splitting the stock. Harley-Davidson recently declared a 2-for-1 stock split executed in the form of a 100% stock dividend.