Garber Corporation had 56,000 shares of $14 par common stock outstanding on January 1, Year 1. On June 1, Year 1 Garber purchased 6,900 shares of its own stock on the open market for $24 per share and held it as treasury stock. On October 1, Year 1 Garber declared and issued a 10% stock dividend. The market value of Garber's stock was $26 per share on October 1. Garber's board of directors declared and paid a cash dividend of $58,600 on December 15, Year 1.

Financial Accounting: The Impact on Decision Makers
10th Edition
ISBN:9781305654174
Author:Gary A. Porter, Curtis L. Norton
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Chapter11: Stockholders' Equity
Section: Chapter Questions
Problem 11.13AMCP
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### Garber Corporation Stock and Dividends Case Study

**Company Overview:**
Garber Corporation had 56,000 shares of $14 par common stock outstanding as of January 1, Year 1.

**Transactions:**

1. **Treasury Stock Purchase:**
   - Date: June 1, Year 1
   - Amount: 6,900 shares
   - Price: $24 per share
   - Result: Shares held as treasury stock.

2. **Stock Dividend:**
   - Date: October 1, Year 1
   - Type: 10% stock dividend
   - Market Value: $26 per share

3. **Cash Dividend:**
   - Declaration and Payment Date: December 15, Year 1
   - Amount: $58,600

**Required Analysis:**

a. **Treasury Stock Purchase Impact:**
   - Determine the effect on the financial statements.

b. **Stock Dividend Issuance Effect:**
   - Analyze the impact on each financial statement component.

c. **Cash Dividend Declaration and Payment:**
   - Evaluate its influence on the financial statements.

d. **Per Share Cash Dividend Calculation:**
   - Calculate the dividend distributed per share on December 15.

**Instructions:**

- Complete the analysis using the provided tabs for each requirement.
- For treasury stock purchase effects, specify any decrease to account balances and cash outflows with a minus sign. Identify cash flows as operating (OA), investing (IA), or financing activity (FA).
- Remember that certain sections may not require input, so leave cells blank if necessary.

### Required Actions:

- **Balance Sheet, Income Statement, and Cash Flow Statement:**
  - Assets, Liabilities, Stockholders' Equity, Revenues, Expenses, Net Income, and Cash Flows will reflect the impacts of the above transactions.

This case study provides an opportunity to explore the implications of stock transactions and dividends on a corporation’s financial health and reporting.
Transcribed Image Text:### Garber Corporation Stock and Dividends Case Study **Company Overview:** Garber Corporation had 56,000 shares of $14 par common stock outstanding as of January 1, Year 1. **Transactions:** 1. **Treasury Stock Purchase:** - Date: June 1, Year 1 - Amount: 6,900 shares - Price: $24 per share - Result: Shares held as treasury stock. 2. **Stock Dividend:** - Date: October 1, Year 1 - Type: 10% stock dividend - Market Value: $26 per share 3. **Cash Dividend:** - Declaration and Payment Date: December 15, Year 1 - Amount: $58,600 **Required Analysis:** a. **Treasury Stock Purchase Impact:** - Determine the effect on the financial statements. b. **Stock Dividend Issuance Effect:** - Analyze the impact on each financial statement component. c. **Cash Dividend Declaration and Payment:** - Evaluate its influence on the financial statements. d. **Per Share Cash Dividend Calculation:** - Calculate the dividend distributed per share on December 15. **Instructions:** - Complete the analysis using the provided tabs for each requirement. - For treasury stock purchase effects, specify any decrease to account balances and cash outflows with a minus sign. Identify cash flows as operating (OA), investing (IA), or financing activity (FA). - Remember that certain sections may not require input, so leave cells blank if necessary. ### Required Actions: - **Balance Sheet, Income Statement, and Cash Flow Statement:** - Assets, Liabilities, Stockholders' Equity, Revenues, Expenses, Net Income, and Cash Flows will reflect the impacts of the above transactions. This case study provides an opportunity to explore the implications of stock transactions and dividends on a corporation’s financial health and reporting.
**Garber Corporation Case Study: Financial Transactions Analysis**

Garber Corporation had 56,000 shares of $14 par common stock outstanding on January 1, Year 1. The following transactions took place during Year 1:

- **June 1**: Garber purchased 6,900 shares of its own stock on the open market for $24 per share and held it as treasury stock.
- **October 1**: Garber declared and issued a 10% stock dividend. The market value of Garber's stock was $26 per share on this date.
- **December 15**: Garber's board of directors declared and paid a cash dividend of $58,600.

**Required Analysis:**

a. Analyze how the purchase of the treasury stock impacts the financial statements.

b. Demonstrate how the issuance of the stock dividend influences each element of the financial statements.

c. Explain how the declaration and payment of the cash dividend alter the financial statements.

d. Calculate the per-share cash dividend paid on December 15.

**Instructions for Completing the Analysis:**

Complete this analysis by entering your responses in the tabs provided for each required section (A, B, C, D).

### Required Analysis Sections:

#### Required A: 
- **Treasury stock purchase analysis** - Impact on financial statements.

#### Required B: 
- **Stock dividend issuance analysis** - Effect on each financial statement element. Indicate any decreases with a minus sign and classify cash flows as operating (OA), investing (IA), or financing activities (FA).

#### Required C: 
- **Cash dividend declaration and payment analysis** - Impact on financial statements.

#### Required D: 
- **Per-share dividend calculation** - Determine the dividend paid per share on December 15.

### Financial Statement Framework:

**Balance Sheet**:
- Assets = Liabilities + Stockholders' Equity

**Income Statement**:
- Revenues - Expenses = Net Income

**Statement of Cash Flows**:
- Categorize cash flows as OA, IA, or FA.

Provide thorough explanations and calculations for each requirement.
Transcribed Image Text:**Garber Corporation Case Study: Financial Transactions Analysis** Garber Corporation had 56,000 shares of $14 par common stock outstanding on January 1, Year 1. The following transactions took place during Year 1: - **June 1**: Garber purchased 6,900 shares of its own stock on the open market for $24 per share and held it as treasury stock. - **October 1**: Garber declared and issued a 10% stock dividend. The market value of Garber's stock was $26 per share on this date. - **December 15**: Garber's board of directors declared and paid a cash dividend of $58,600. **Required Analysis:** a. Analyze how the purchase of the treasury stock impacts the financial statements. b. Demonstrate how the issuance of the stock dividend influences each element of the financial statements. c. Explain how the declaration and payment of the cash dividend alter the financial statements. d. Calculate the per-share cash dividend paid on December 15. **Instructions for Completing the Analysis:** Complete this analysis by entering your responses in the tabs provided for each required section (A, B, C, D). ### Required Analysis Sections: #### Required A: - **Treasury stock purchase analysis** - Impact on financial statements. #### Required B: - **Stock dividend issuance analysis** - Effect on each financial statement element. Indicate any decreases with a minus sign and classify cash flows as operating (OA), investing (IA), or financing activities (FA). #### Required C: - **Cash dividend declaration and payment analysis** - Impact on financial statements. #### Required D: - **Per-share dividend calculation** - Determine the dividend paid per share on December 15. ### Financial Statement Framework: **Balance Sheet**: - Assets = Liabilities + Stockholders' Equity **Income Statement**: - Revenues - Expenses = Net Income **Statement of Cash Flows**: - Categorize cash flows as OA, IA, or FA. Provide thorough explanations and calculations for each requirement.
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