Joanne Harper, a sagacious investor, prefers the stock of a company with a higher ratio of retained earnings to contributed capital (common stock plus paid-in capital). The ratio should preferably be above 2.0, in Joanne's opinion. She finds Barrington Corporation acceptable because the equity breakdown at year-end is as follows: Common stock, par $1 $34,600 Additional paid-in capital $66,500 Retained Earnings $210,000 The financial statement footnotes of Barrington reveal that the company paid a stock dividend on the last day of the fiscal year. Specifically, the firm declared a stock dividend equivalent to 21% of the (then) outstanding shares and recorded the transaction as a large stock dividend. Assume that the stock price was $10 per share on the date the stock dividend was recorded.

Joanne Harper, a sagacious investor, prefers the stock of a company with a higher ratio of retained earnings to contributed capital (common stock plus paid-in capital). The ratio should preferably be above 2.0, in Joanne's opinion. She finds Barrington Corporation acceptable because the equity breakdown at year-end is as follows: Common stock, par $1 $34,600 Additional paid-in capital $66,500 Retained Earnings $210,000 The financial statement footnotes of Barrington reveal that the company paid a stock dividend on the last day of the fiscal year. Specifically, the firm declared a stock dividend equivalent to 21% of the (then) outstanding shares and recorded the transaction as a large stock dividend. Assume that the stock price was $10 per share on the date the stock dividend was recorded.

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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