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If Liang declared a 10% stock dividend instead of doing the stock split, what would the relevant section of the balance sheet look like? 13.

If Liang declared a 10% stock dividend instead of doing the stock split, what would the relevant section of the balance sheet look like? 13.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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The following information is for questions 12 and 13. The Liang Company's balance sheet has the following capital section. Liang's stock is currently selling for $5 per share. - Common Stock (50,000 shares at $1 par): $50,000 - Capital in Excess of Par: $50,000 - Retained Earnings: $100,000 - Total: $200,000 **12. Liang plans to declare a 2 for 1 stock split. Show the relevant section of the balance sheet after this.** - Common Stock (100,000 shares at $0.50 par): $50,000 - Capital in Excess of Par: $50,000 - Retained Earnings: $100,000 - Total: $200,000 **13. If Liang declared a 10% stock dividend instead of doing the stock split, what would the relevant section of the balance sheet look like?** - Common Stock (____ shares at $____ par): $_______ - Capital in Excess of Par: $_______ - Retained Earnings: $_______ - Total: $_______ **Explanation:** 1. **Stock Split:** A 2 for 1 stock split means that the number of shares is doubled, and the par value per share is halved. This does not change the total dollar amount under common stock or the overall balance section. 2. **Stock Dividend:** A 10% stock dividend implies that each shareholder receives additional shares equal to 10% of their current holdings. The exact changes in the balance sheet depend on the market price and other specific dividend details to be filled in.
Transcribed Image Text:The following information is for questions 12 and 13. The Liang Company's balance sheet has the following capital section. Liang's stock is currently selling for $5 per share. - Common Stock (50,000 shares at $1 par): $50,000 - Capital in Excess of Par: $50,000 - Retained Earnings: $100,000 - Total: $200,000 **12. Liang plans to declare a 2 for 1 stock split. Show the relevant section of the balance sheet after this.** - Common Stock (100,000 shares at $0.50 par): $50,000 - Capital in Excess of Par: $50,000 - Retained Earnings: $100,000 - Total: $200,000 **13. If Liang declared a 10% stock dividend instead of doing the stock split, what would the relevant section of the balance sheet look like?** - Common Stock (____ shares at $____ par): $_______ - Capital in Excess of Par: $_______ - Retained Earnings: $_______ - Total: $_______ **Explanation:** 1. **Stock Split:** A 2 for 1 stock split means that the number of shares is doubled, and the par value per share is halved. This does not change the total dollar amount under common stock or the overall balance section. 2. **Stock Dividend:** A 10% stock dividend implies that each shareholder receives additional shares equal to 10% of their current holdings. The exact changes in the balance sheet depend on the market price and other specific dividend details to be filled in.
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