Juno Corporation's stockholders' equity section at December 31, 2019 appears below: Stockholder's equity Paid-in capital Common stock, $10 par, 60,000 outstanding $600,000 Paid-in capital in excess of par 150,000 Total paid-in capital $750,000 Retained earnings 150,000 Total stockholder's equity $900,000 On June 30, 2020, the board of directors of Juno Corporation declared a 20% stock dividend, payable on July 31, 2020, to stockholders of record on July 15, 2020. The fair value of Juno Corporation's stock on June 30, 2020, was $15. On December 1, 2020, the board of directors declared a 2 for 1 stock split effective December 15, 2020. Juno Corporation's stock was selling for $20 on December 1, 2020, before the stock split was declared. Par value of the stock was adjusted. Net income for 2020 was $190,000 and there were no cash dividends declared.
Dividend Valuation
Dividend refers to a reward or cash that a company gives to its shareholders out of the profits. Dividends can be issued in various forms such as cash payment, stocks, or in any other form as per the company norms. It is usually a part of the profit that the company shares with its shareholders.
Dividend Discount Model
Dividend payments are generally paid to investors or shareholders of a company when the company earns profit for the year, thus representing growth. The dividend discount model is an important method used to forecast the price of a company’s stock. It is based on the computation methodology that the present value of all its future dividends is equivalent to the value of the company.
Capital Gains Yield
It may be referred to as the earnings generated on an investment over a particular period of time. It is generally expressed as a percentage and includes some dividends or interest earned by holding a particular security. Cases, where it is higher normally, indicate the higher income and lower risk. It is mostly computed on an annual basis and is different from the total return on investment. In case it becomes too high, indicates that either the stock prices are going down or the company is paying higher dividends.
Stock Valuation
In simple words, stock valuation is a tool to calculate the current price, or value, of a company. It is used to not only calculate the value of the company but help an investor decide if they want to buy, sell or hold a company's stocks.
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| Date | Account titles and explanation | Debit | Credit |
| June 30 | Stock dividends [This is closed to Retained Earnings] (12000*15) | $ 180,000 | |
| Common stock dividend distributable (12000*10) | $ 120,000 | ||
| Paid in capital excess of par value (180000-120000) | $ 60,000 | ||
| (To record stock dividend declared.) [Stock issued = 60000*20%=12000] | |||
| July 31 | Common stock dividend distributable | $ 120,000 | |
| Common stock | $ 120,000 | ||
|
(To record Stock Dividend Distributed.) [Stock outstandings = 60000 + 12000 = 72000] |
|||
| Dec 1 | No entry [Par value = 10/2 = $5] | $ - | |
| No entry [Stock outstanings = 72000 x 2 = 144000] | $ - | ||
| No entry would be required for stock split. | |||
| Dec 31 | Income summary | $ 190,000 | |
| Retained earnings | $ 190,000 | ||
| (To record close the net income) | |||
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