Qd 106. Stock split versus stock dividend-Firm Mammoth Corporation is considering a 3-for-2 stock split. It currently has the stockholders' equity position shown. The current stockprice is $120 per share. The most recent period's earnings available for common stock is included in retained earnings.Preferred stockCommon stock (90,000 shares at $5 par)Paid-in capital in excess of parRetained earningsTotal stockholders' equity$ 1,000,000450,0001,700,00010,000,000$13,150,000a. What effect on Mammoth's equity account would result from the stock split?b. What change in stock price would you expect to result from the stock split?c. What is the maximum cash dividend per share that the firm could pay on common stock before and after the stock split? (Assume that legal capital includes all paid-in capital.)d. Contrast your answers to parts a through c. with the circumstances surrounding a 50% stock dividend.

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Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter10: Stockholder's Equity

Section: Chapter Questions

Problem 70E: Stock Dividend The balance sheet of Cohen Enterprises includes the following stockholders equity...

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The Castle Company recently reported net profits after taxes of $15.8 million. It has 2.5 million shares of common stock outstanding and pays preferred dividends of $1 million a year. The company’s stock currently trades at $60 per share. Compute the stock’s earnings per share (EPS). What is the stock’s P/E ratio? Determine what the stock’s dividend yield would be if it paid $1.75 per share to common stockholders.
Stock Dividend The balance sheet of Cohen Enterprises includes the following stockholders equity section: Required: On April 15, 2019, when its stock was selling for $18 per share, Cohen Enterprises issued a small stock dividend. After making the journal entry to recognize the stock dividend, Cohens total capital stock increased by $270,000. In percentage terms, what was the size of the stock dividend? Ignoring the small stock dividend discussed in Requirement 1, assume that on June 1, 2019, when its stock was selling for $22 per share, Cohen issued a large stock dividend. After making the journal entry to recognize the stock dividend, Cohens retained earnings decreased by $75,000. In percentage terms, what was the size of the stock dividend?
Nutritious Pet Food Companys board of directors declares a large stock dividend (50%) on June 30 when the stocks market value per share is $30. At that time, there are 10,000 shares of $1 par value common stock outstanding (none held in treasury). What is the journal entry to record the stock dividend distribution on July 31?
Alert Companys shareholders equity prior to any of the following events is as follows: The company is considering the following alternative items: 1. An 8% stock dividend on the common stock when it is selling for 30 per share. 2. A 30% stock dividend on the common stock when it is selling for 32 per share. 3. A special stock dividend to common shareholders consisting of 1 share of preferred stock for every 100 shares of common stock. The preferred stock and common stock are selling for 123 and 31 per share, respectively. 4. A 2-for-1 stock split on the common stock, reducing the par value to 5 per share (assume the same date for declaration and issuance). The market price is 30 per share on the common stock. 5. A property dividend to common shareholders consisting of 100 bonds issued by West Company. These bonds are carried on the Alert Company books as an available-for sale investment at a fair value of 48,000 (which is also its cost); it has a current value of 54,000. 6. A cash dividend, consisting of a normal dividend and a liquidating dividend, on both the preferred and the common stock. The 10% preferred dividend includes a 2% liquidating dividend, and the 2.30 per share common dividend includes a 0.30 per share liquidating dividend (separate liquidating dividend contra accounts should be used). Required: For each of the preceding alternative items: 1. Record (a) the journal entry at the date of declaration and (b) the journal entry at the date of issuance. 2. Compute the balances in the shareholders equity accounts immediately after the issuance (any gains or losses are to be reflected in the retained earnings balance; ignore income taxes).
Nutritious Pet Food Companys board of directors declares a large stock dividend (50%) on June 30 when the stocks market value per share is $30. At that time, there are 10,000 shares of $1 par value common stock outstanding (none held in treasury). What is the journal entry to record the declaration of the dividend?
Stock Dividends Crystal Corporation has the following information regarding its common stock: S10 par. with 500.000 shares authorized, 213,000 shares issued, and 183,700 shares outstanding. On August 22, 2019, Crystal declared and paid a 15% stock dividend when the market price of the common stock was $30 per share. Required: Prepare the journal entries to record declaration and payment of this stock dividend. Prepare the journal entries to record declaration and payment assuming it was a 30% stock dividend.
Nutritious Pet Food Companys board of directors declares a small stock dividend (20%) on June 30 when the stocks market value per share is $30. At that time, there are 10,000 shares of $1 par value common stock outstanding (none held in treasury). What is the journal entry to record the declaration of the dividend?
Preferred Stock Dividends Seashell Corporation has 25,000 shares outstanding of 8%, S10 par value, cumulative preferred stock. In 2017 and 2018, no dividends were declared on preferred stock. In 2019, Seashell had a profitable year and decided to pay dividends to stockholders of both preferred and common stock. Required: If Seashell has $200,000 available for dividends in 2019, how much could it pay to the common stockholders Seashell Corporation has 25,000 shares outstanding of 8%, S10 par value, cumulative preferred stock. In 2017 and 2018, no dividends were declared on preferred stock. In 2019, Seashell had a profitable year and decided to pay dividends to stockholders of both preferred and common stock. Required: If Seashell has S200,000 available for dividends in 2019, how much could it pay to the common stockholders
Preferred Dividends Eastern Inc.s equity includes 8%, $25 par preferred stock. There are 100,000 shares authorized and 45,000 shares outstanding. Assume that Eastern declares and pays preferred dividends quarterly. Required: Prepare the journal entry to record declaration of one quarterly dividend. Prepare the journal entry to record payment of the one quarterly dividend.
Treasury Stock, Cost Method Bush-Caine Company reported the following data on its December 31, 2018, balance sheet: The following transactions were reported by the company during 2019: 1. Reacquired 200 shares of its preferred stock at 57 per share. 2. Reacquired 500 shares of its common stock at 16 per share. 3. Sold 100 shares of preferred treasury stock at 58 per share. 4. Sold 200 shares of common treasury stock at 17 per share. 5. Sold 100 shares of common treasury stock at 9 per share. 6. Retired the shares of common stock remaining in the treasury. The company maintains separate treasury stock accounts and related additional paid-in capital accounts for each class of stock. Required: 1. Prepare the journal entries required to record the treasury stock transactions using the cost method. 2. Assuming the company earned a net income in 2019 of 30.000 and declared and paid dividends of 10,000, prepare the shareholders equity section of its balance sheet at December 31, 2019.

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