Myers Company provides you with the following condensed balance sheet information. Assets 0000 Liabilities and Stockholders’ Equity Current assets $ 40,000 Current and long-term liabilities 00 $100,000 Equity investments 60,000 Stockholders’ equity 00 00 Equipment (net) 250,000 00Common stock ($5 par) $ 20,000 00 Intangibles $160,000 00Paid-in capital in excess of par 110,000 00 00Total assets $410,000 00Retained earnings 0180,000 $310,000 00 00 0000Total liabilities and stockholders’ equity 00 $410,000 Instructions For each of the following transactions, indicate the dollar impact (if any) on the following five items: (1) total assets, (2) common stock, (3) paid-in capital in excess of par, (4) retained earnings, and (5) stockholders’ equity. (Each situation is independent.) a. Myers declares and pays a $0.50 per share cash dividend. b. Myers declares and issues a 10% stock dividend when the market price of the stock is $14 per share. c. Myers declares and issues a 30% stock dividend when the market price of the stock is $15 per share. d. Myers declares and distributes a property dividend. Myers gives one share of its equity investment (ABC stock) for every two shares of Myers Company stock held. Myers owns 10,000 shares of ABC. ABC is selling for $10 per share on the date the property dividend is declared. e. Myers declares a 2-for-1 stock split and issues new shares.
Reporting Cash Flows
Reporting of cash flows means a statement of cash flow which is a financial statement. A cash flow statement is prepared by gathering all the data regarding inflows and outflows of a company. The cash flow statement includes cash inflows and outflows from various activities such as operating, financing, and investment. Reporting this statement is important because it is the main financial statement of the company.
Balance Sheet
A balance sheet is an integral part of the set of financial statements of an organization that reports the assets, liabilities, equity (shareholding) capital, other short and long-term debts, along with other related items. A balance sheet is one of the most critical measures of the financial performance and position of the company, and as the name suggests, the statement must balance the assets against the liabilities and equity. The assets are what the company owns, and the liabilities represent what the company owes. Equity represents the amount invested in the business, either by the promoters of the company or by external shareholders. The total assets must match total liabilities plus equity.
Financial Statements
Financial statements are written records of an organization which provide a true and real picture of business activities. It shows the financial position and the operating performance of the company. It is prepared at the end of every financial cycle. It includes three main components that are balance sheet, income statement and cash flow statement.
Owner's Capital
Before we begin to understand what Owner’s capital is and what Equity financing is to an organization, it is important to understand some basic accounting terminologies. A double-entry bookkeeping system Normal account balances are those which are expected to have either a debit balance or a credit balance, depending on the nature of the account. An asset account will have a debit balance as normal balance because an asset is a debit account. Similarly, a liability account will have the normal balance as a credit balance because it is amount owed, representing a credit account. Equity is also said to have a credit balance as its normal balance. However, sometimes the normal balances may be reversed, often due to incorrect journal or posting entries or other accounting/ clerical errors.
Myers Company provides you with the following condensed
| Assets | 0000 | Liabilities and |
||
| Current assets |
$ 40,000
|
Current and long-term liabilities | 00 |
$100,000
|
| Equity investments |
60,000
|
Stockholders’ equity | 00 | 00 |
| Equipment (net) |
250,000
|
00Common stock ($5 par) |
$ 20,000
|
00 |
| Intangibles |
$160,000
|
00Paid-in capital in excess of par |
110,000
|
00 |
| 00Total assets |
$410,000
|
00Retained earnings |
0180,000
|
$310,000
|
| 00 | 00 | 0000Total liabilities and stockholders’ equity | 00 |
$410,000
|
Instructions
For each of the following transactions, indicate the dollar impact (if any) on the following five items: (1) total assets, (2) common stock, (3) paid-in capital in excess of par, (4)
a. Myers declares and pays a $0.50 per share cash dividend.
b. Myers declares and issues a 10% stock dividend when the market price of the stock is $14 per share.
c. Myers declares and issues a 30% stock dividend when the market price of the stock is $15 per share.
d. Myers declares and distributes a property dividend. Myers gives one share of its equity investment (ABC stock) for every two shares of Myers Company stock held. Myers owns 10,000 shares of ABC. ABC is selling for $10 per share on the date the property dividend is declared.
e. Myers declares a 2-for-1 stock split and issues new shares.
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