Problem 10-04Firm A had the following selected items on its balance sheet:Cash$27,000,000Common stock ($40 par; 2,000,000 shares outstanding) 80,000,000Additional paid-in capital 12,000,000Retained earnings 64,000,000How would each of these accounts appear after:a cash dividend of $1.5 per share? Round the number of shares outstanding to the nearest whole number and the other answers to the nearest dollar.a 7 percent stock dividend (fair market value is $80 per share)? Use the original balance sheet from the problem statement. Round the number of shares outstanding to the nearest whole number and the other answers to the nearest dollar.a one-for-two reverse split? Use the original balance sheet from the problem statement. Round the number of shares outstanding to the nearest whole number and the other answers to the nearest dollar.

The balance sheet is the statement that shows the financial position of the company. The company reports its assets, liabilities, and owner's equity on this statement. Common stock is those stock which is issued or authorized by the company to raise funds. The common stock transferred and issued provides the right to vote and ownership is transferred to the common stockholders'. The dividend is the amount that is earned by the shareholders' on their purchased shares. The dividend is declared from the retained earnings and net income.1: Cash and retained earnings are reduced by the declaration of the dividend. There are no changes in the common stock and additional paid-in capital because the fair market value of the share is the same in this case.2: The common stock account and a paid-in-capital account will be increased because of the increase in the fair value of the market. There will be no impact on cash as this is just a book entry. Retained earnings will be decreased by the stock dividend transaction amount.3: No amount of changes are there in the balance sheet as stocks are only spat and this will be recorded in the books by changing the par value and number of outstanding shares.

Answered: How would each of these accounts appear…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Question

Problem 10-04

Firm A had the following selected items on its balance sheet:

Cash	$	27,000,000
Common stock ($40 par; 2,000,000 shares outstanding)		80,000,000
Additional paid-in capital		12,000,000
Retained earnings		64,000,000

How would each of these accounts appear after:

a cash dividend of $1.5 per share? Round the number of shares outstanding to the nearest whole number and the other answers to the nearest dollar.
a 7 percent stock dividend (fair market value is $80 per share)? Use the original balance sheet from the problem statement. Round the number of shares outstanding to the nearest whole number and the other answers to the nearest dollar.
a one-for-two reverse split? Use the original balance sheet from the problem statement. Round the number of shares outstanding to the nearest whole number and the other answers to the nearest dollar.

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 4 steps with 3 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions