(a) Introduction: Dividend is the amount that is paid to the stockholders’ periodically as a return on their investment in the company. Dividend can be made in two forms i.e. Cash Dividend and Stock Dividend. To prepare: Journal Entries for cash dividend and calculate value of retained earnings as well total assets.

Question

Want to see more full solutions like this?

Answer 1

Question

Chapter 10, Problem 86PSB

To determine

(a)

Introduction:

Dividend is the amount that is paid to the stockholders’ periodically as a return on their investment in the company. Dividend can be made in two forms i.e. Cash Dividend and Stock Dividend.

To prepare:

Journal Entries for cash dividend and calculate value of retained earnings as well total assets.

Expert Solution

Answer to Problem 86PSB

After paying Cash dividend,

Retained Earnings = $389,000

Total Assets = $3,850,000

Journal Entries

Date	Particulars	Debit ($)	Credit ($)
December 31	Retained Earnings Dr. Dividends Payable (Declaration of cash dividend.)	22,000	22,000
December 31	Dividends Payable Dr. Cash (Payment of declared dividend.)	22,000	22,000

Explanation of Solution

Given:

Total Assets is equal to $3,872,000, common stock selling at $23 as on 31^st December 2019 and following equity statement:

Particulars	$
Common stock, $5 par, 10,000 shares issued and outstanding	95,000
(+) Additional Paid-in capital − common stock	162,000
Total Capital Stock	257,000
Retained Earnings	411,000
Total Stockholders’ equity	668,000

There are two types of dividend i.e. Stock and Cash Dividend.

The first effect of both the dividends (cash or stock) is on Retained Earnings of the company. The dividend payable amount reduces the balance in retained earnings.
The second effect of the dividend (cash or stock) is on the account through which they are paid.
If cash dividend is paid then the second effect is on cash account as cash in the company decreases.
If stock dividend is paid then the second effect is on common stock and additional paid in capital account as new shares are issued as dividends which further increase the balance of these accounts.

Before Cash Dividend was paid,

Retained Earnings = $411,000

Total Assets = $3,872,000

After payment of Cash Dividend of $22,000,

Retained Earnings = $411,000 - $22,000

Retained Earnings = $389,000

Total Assets = $3,872,000 - $22,000

Total Assets = $3,850,000.

To determine

(b)

Introduction:

Dividend is the amount that is paid to the stockholders’ periodically as a return on their investment in the company. Dividend can be made in two forms i.e. Cash Dividend and Stock Dividend.

To prepare:

Journal Entry for stock dividend and calculate value of retained earnings as well total assets.

Expert Solution

Answer to Problem 86PSB

After paying Stock dividend,

Retained Earnings = $383,400

Total Assets (will remain same) = $3,872,000

Journal Entries

Date	Particulars	Debit ($)	Credit ($)
December 31	Retained Earnings Dr. Common Stock Additional Paid-in Capital (Declaration of cash dividend.)	27,600	6,000 21,600

Explanation of Solution

Given:

Total Assets is equal to $3,872,000, common stock selling at $23 as on 31^st December 2019 and following equity statement:

Particulars	$
Common stock, $5 par, 10,000 shares issued and outstanding	95,000
(+) Additional Paid-in capital − common stock	162,000
Total Capital Stock	257,000
Retained Earnings	411,000
Total Stockholders’ equity	668,000

There are two types of dividend i.e. Stock and Cash Dividend.

The first effect of both the dividends (cash or stock) is on Retained Earnings of the company. The dividend payable amount reduces the balance in retained earnings.
The second effect of the dividend (cash or stock) is on the account through which they are paid.
If cash dividend is paid then the second effect is on cash account as cash in the company decreases.
If stock dividend is paid then the second effect is on common stock and additional paid in capital account as new shares are issued as dividends which further increase the balance of these accounts.

No. of shares outstanding = 10,000

Stock Dividend = 12%

Stock Dividend = 1,200 shares

Total Par value of stock dividend = Stock Dividend × Par value

Total Par value of stock dividend = 1,200 × $5

Total Par value of stock dividend = $6,000

Total Market value of stock dividend = Stock Dividend × Stock Price

Total Market value of stock dividend = 1,200 × $23

Total Market value of stock dividend = $27,600

Additional Paid in capital = $27,600 - $6,000

Additional Paid in capital = $21,600

Before Stock Dividend was paid,

Retained Earnings = $411,000

Total Assets = $3,872,000

After payment of Stock Dividend,

Retained Earnings = $411,000 - $$27,600

Retained Earnings = $383,400

Total Assets (will remain same) = $3,872,000.

To determine

(c)

Introduction:

In stock split, shares outstanding increases by given ratio and the price of stock decreases by the same ratio wherein the total stockholders’ equity remains unchanged.

To state:

Whether journal entry will be recorded for stock split and the value of retained earnings as well total assets.

Expert Solution

Answer to Problem 86PSB

After Stock-split,

Retained Earnings = $411,000

Total Assets = $3,872,000

Stock split doesn’t affect the Total assets as well retained earnings. Thus, they remain same. It only affects no. of shares outstanding and price per share (still stockholders’ equity remains unchanged).

Since there is no actual change in stockholders’ equity or balance sheet as a whole, hence no journal entry is required for stock split.

Explanation of Solution

Given:

Total Assets is equal to $3,872,000, common stock selling at $23 as on 31^st December 2019 and following equity statement:

Particulars	$
Common stock, $5 par, 10,000 shares issued and outstanding	95,000
(+) Additional Paid-in capital − common stock	162,000
Total Capital Stock	257,000
Retained Earnings	411,000
Total Stockholders’ equity	668,000

Before stock split,

No. of shares outstanding = 10,000

Par Value = $5

After stock split,

Stock Split ratio = 2-for-1

No. of shares outstanding = 10,000 × 2

No. of shares outstanding = 20,000

Par Value = $52

Par Value = $2.5

Before Stock-split,

Retained Earnings = $411,000

Total Assets = $3,872,000

Shareholders’ equity = No. of shares outstanding × Par value

Shareholders’ equity = 10,000 × $5

Shareholders’ equity = $50,000

After Stock-split,

Retained Earnings = $411,000

Total Assets = $3,872,000

Shareholders’ equity = No. of shares outstanding × Par value

Shareholders’ equity = 20,000 × $2.5

Shareholders’ equity = $50,000.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Students have asked these similar questions

Beginning inventory, purchases, and sales for an inventory item are as follows: Date Line Item Description Units and Cost Sep. 1 Beginning Inventory 23 units @ $15 5 Sale 13 units 17 Purchase 25 units @ $17 30 Sale 17 units Assuming a perpetual inventory system and the last-in, first-out method: Determine the cost of goods sold for the September 30 sale.$ Determine the inventory on September 30. $

Line Item Description Units and Cost Beginning inventory 12 units at $48 First purchase 15 units at $53 Second purchase 55 units at $56 Third purchase 13 units at $61 The firm uses the periodic inventory system, and there are 25 units of the commodity on hand at the end of the year. What is the ending inventory balance of Commodity Z using LIFO? a. $1,465 b. $1,265 c. $5,244 d. $1,200

Company sells blankets for $40 each. The following information was taken from the inventory records during May. The company had no beginning inventory on May 1. Company uses a perpetual inventory system. Date Blankets Units Cost May 3 Purchase 11 $20 10 Sale 4 17 Purchase 10 $17 20 Sale 6 23 Sale 3 30 Purchase 8 $24 Determine the May 31 inventory balance using the FIFO inventory costing method. a. $328 b. $272 c. $320 d. $384

Answer 2

Question

Chapter 10, Problem 86PSB

To determine

(a)

Introduction:

Dividend is the amount that is paid to the stockholders’ periodically as a return on their investment in the company. Dividend can be made in two forms i.e. Cash Dividend and Stock Dividend.

To prepare:

Journal Entries for cash dividend and calculate value of retained earnings as well total assets.

Expert Solution

Answer to Problem 86PSB

After paying Cash dividend,

Retained Earnings = $389,000

Total Assets = $3,850,000

Journal Entries

Date	Particulars	Debit ($)	Credit ($)
December 31	Retained Earnings Dr. Dividends Payable (Declaration of cash dividend.)	22,000	22,000
December 31	Dividends Payable Dr. Cash (Payment of declared dividend.)	22,000	22,000

Explanation of Solution

Given:

Total Assets is equal to $3,872,000, common stock selling at $23 as on 31^st December 2019 and following equity statement:

Particulars	$
Common stock, $5 par, 10,000 shares issued and outstanding	95,000
(+) Additional Paid-in capital − common stock	162,000
Total Capital Stock	257,000
Retained Earnings	411,000
Total Stockholders’ equity	668,000

There are two types of dividend i.e. Stock and Cash Dividend.

The first effect of both the dividends (cash or stock) is on Retained Earnings of the company. The dividend payable amount reduces the balance in retained earnings.
The second effect of the dividend (cash or stock) is on the account through which they are paid.
If cash dividend is paid then the second effect is on cash account as cash in the company decreases.
If stock dividend is paid then the second effect is on common stock and additional paid in capital account as new shares are issued as dividends which further increase the balance of these accounts.

Before Cash Dividend was paid,

Retained Earnings = $411,000

Total Assets = $3,872,000

After payment of Cash Dividend of $22,000,

Retained Earnings = $411,000 - $22,000

Retained Earnings = $389,000

Total Assets = $3,872,000 - $22,000

Total Assets = $3,850,000.

To determine

(b)

Introduction:

Dividend is the amount that is paid to the stockholders’ periodically as a return on their investment in the company. Dividend can be made in two forms i.e. Cash Dividend and Stock Dividend.

To prepare:

Journal Entry for stock dividend and calculate value of retained earnings as well total assets.

Expert Solution

Answer to Problem 86PSB

After paying Stock dividend,

Retained Earnings = $383,400

Total Assets (will remain same) = $3,872,000

Journal Entries

Date	Particulars	Debit ($)	Credit ($)
December 31	Retained Earnings Dr. Common Stock Additional Paid-in Capital (Declaration of cash dividend.)	27,600	6,000 21,600

Explanation of Solution

Given:

Total Assets is equal to $3,872,000, common stock selling at $23 as on 31^st December 2019 and following equity statement:

Particulars	$
Common stock, $5 par, 10,000 shares issued and outstanding	95,000
(+) Additional Paid-in capital − common stock	162,000
Total Capital Stock	257,000
Retained Earnings	411,000
Total Stockholders’ equity	668,000

There are two types of dividend i.e. Stock and Cash Dividend.

The first effect of both the dividends (cash or stock) is on Retained Earnings of the company. The dividend payable amount reduces the balance in retained earnings.
The second effect of the dividend (cash or stock) is on the account through which they are paid.
If cash dividend is paid then the second effect is on cash account as cash in the company decreases.
If stock dividend is paid then the second effect is on common stock and additional paid in capital account as new shares are issued as dividends which further increase the balance of these accounts.

No. of shares outstanding = 10,000

Stock Dividend = 12%

Stock Dividend = 1,200 shares

Total Par value of stock dividend = Stock Dividend × Par value

Total Par value of stock dividend = 1,200 × $5

Total Par value of stock dividend = $6,000

Total Market value of stock dividend = Stock Dividend × Stock Price

Total Market value of stock dividend = 1,200 × $23

Total Market value of stock dividend = $27,600

Additional Paid in capital = $27,600 - $6,000

Additional Paid in capital = $21,600

Before Stock Dividend was paid,

Retained Earnings = $411,000

Total Assets = $3,872,000

After payment of Stock Dividend,

Retained Earnings = $411,000 - $$27,600

Retained Earnings = $383,400

Total Assets (will remain same) = $3,872,000.

To determine

(c)

Introduction:

In stock split, shares outstanding increases by given ratio and the price of stock decreases by the same ratio wherein the total stockholders’ equity remains unchanged.

To state:

Whether journal entry will be recorded for stock split and the value of retained earnings as well total assets.

Expert Solution

Answer to Problem 86PSB

After Stock-split,

Retained Earnings = $411,000

Total Assets = $3,872,000

Stock split doesn’t affect the Total assets as well retained earnings. Thus, they remain same. It only affects no. of shares outstanding and price per share (still stockholders’ equity remains unchanged).

Since there is no actual change in stockholders’ equity or balance sheet as a whole, hence no journal entry is required for stock split.

Explanation of Solution

Given:

Total Assets is equal to $3,872,000, common stock selling at $23 as on 31^st December 2019 and following equity statement:

Particulars	$
Common stock, $5 par, 10,000 shares issued and outstanding	95,000
(+) Additional Paid-in capital − common stock	162,000
Total Capital Stock	257,000
Retained Earnings	411,000
Total Stockholders’ equity	668,000

Before stock split,

No. of shares outstanding = 10,000

Par Value = $5

After stock split,

Stock Split ratio = 2-for-1

No. of shares outstanding = 10,000 × 2

No. of shares outstanding = 20,000

Par Value = $52

Par Value = $2.5

Before Stock-split,

Retained Earnings = $411,000

Total Assets = $3,872,000

Shareholders’ equity = No. of shares outstanding × Par value

Shareholders’ equity = 10,000 × $5

Shareholders’ equity = $50,000

After Stock-split,

Retained Earnings = $411,000

Total Assets = $3,872,000

Shareholders’ equity = No. of shares outstanding × Par value

Shareholders’ equity = 20,000 × $2.5

Shareholders’ equity = $50,000.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 3

Question

Chapter 10, Problem 86PSB

To determine

(a)

Introduction:

Dividend is the amount that is paid to the stockholders’ periodically as a return on their investment in the company. Dividend can be made in two forms i.e. Cash Dividend and Stock Dividend.

To prepare:

Journal Entries for cash dividend and calculate value of retained earnings as well total assets.

Expert Solution

Answer to Problem 86PSB

After paying Cash dividend,

Retained Earnings = $389,000

Total Assets = $3,850,000

Journal Entries

Date	Particulars	Debit ($)	Credit ($)
December 31	Retained Earnings Dr. Dividends Payable (Declaration of cash dividend.)	22,000	22,000
December 31	Dividends Payable Dr. Cash (Payment of declared dividend.)	22,000	22,000

Explanation of Solution

Given:

Total Assets is equal to $3,872,000, common stock selling at $23 as on 31^st December 2019 and following equity statement:

Particulars	$
Common stock, $5 par, 10,000 shares issued and outstanding	95,000
(+) Additional Paid-in capital − common stock	162,000
Total Capital Stock	257,000
Retained Earnings	411,000
Total Stockholders’ equity	668,000

There are two types of dividend i.e. Stock and Cash Dividend.

The first effect of both the dividends (cash or stock) is on Retained Earnings of the company. The dividend payable amount reduces the balance in retained earnings.
The second effect of the dividend (cash or stock) is on the account through which they are paid.
If cash dividend is paid then the second effect is on cash account as cash in the company decreases.
If stock dividend is paid then the second effect is on common stock and additional paid in capital account as new shares are issued as dividends which further increase the balance of these accounts.

Before Cash Dividend was paid,

Retained Earnings = $411,000

Total Assets = $3,872,000

After payment of Cash Dividend of $22,000,

Retained Earnings = $411,000 - $22,000

Retained Earnings = $389,000

Total Assets = $3,872,000 - $22,000

Total Assets = $3,850,000.

To determine

(b)

Introduction:

Dividend is the amount that is paid to the stockholders’ periodically as a return on their investment in the company. Dividend can be made in two forms i.e. Cash Dividend and Stock Dividend.

To prepare:

Journal Entry for stock dividend and calculate value of retained earnings as well total assets.

Expert Solution

Answer to Problem 86PSB

After paying Stock dividend,

Retained Earnings = $383,400

Total Assets (will remain same) = $3,872,000

Journal Entries

Date	Particulars	Debit ($)	Credit ($)
December 31	Retained Earnings Dr. Common Stock Additional Paid-in Capital (Declaration of cash dividend.)	27,600	6,000 21,600

Explanation of Solution

Given:

Total Assets is equal to $3,872,000, common stock selling at $23 as on 31^st December 2019 and following equity statement:

Particulars	$
Common stock, $5 par, 10,000 shares issued and outstanding	95,000
(+) Additional Paid-in capital − common stock	162,000
Total Capital Stock	257,000
Retained Earnings	411,000
Total Stockholders’ equity	668,000

There are two types of dividend i.e. Stock and Cash Dividend.

The first effect of both the dividends (cash or stock) is on Retained Earnings of the company. The dividend payable amount reduces the balance in retained earnings.
The second effect of the dividend (cash or stock) is on the account through which they are paid.
If cash dividend is paid then the second effect is on cash account as cash in the company decreases.
If stock dividend is paid then the second effect is on common stock and additional paid in capital account as new shares are issued as dividends which further increase the balance of these accounts.

No. of shares outstanding = 10,000

Stock Dividend = 12%

Stock Dividend = 1,200 shares

Total Par value of stock dividend = Stock Dividend × Par value

Total Par value of stock dividend = 1,200 × $5

Total Par value of stock dividend = $6,000

Total Market value of stock dividend = Stock Dividend × Stock Price

Total Market value of stock dividend = 1,200 × $23

Total Market value of stock dividend = $27,600

Additional Paid in capital = $27,600 - $6,000

Additional Paid in capital = $21,600

Before Stock Dividend was paid,

Retained Earnings = $411,000

Total Assets = $3,872,000

After payment of Stock Dividend,

Retained Earnings = $411,000 - $$27,600

Retained Earnings = $383,400

Total Assets (will remain same) = $3,872,000.

To determine

(c)

Introduction:

In stock split, shares outstanding increases by given ratio and the price of stock decreases by the same ratio wherein the total stockholders’ equity remains unchanged.

To state:

Whether journal entry will be recorded for stock split and the value of retained earnings as well total assets.

Expert Solution

Answer to Problem 86PSB

After Stock-split,

Retained Earnings = $411,000

Total Assets = $3,872,000

Stock split doesn’t affect the Total assets as well retained earnings. Thus, they remain same. It only affects no. of shares outstanding and price per share (still stockholders’ equity remains unchanged).

Since there is no actual change in stockholders’ equity or balance sheet as a whole, hence no journal entry is required for stock split.

Explanation of Solution

Given:

Total Assets is equal to $3,872,000, common stock selling at $23 as on 31^st December 2019 and following equity statement:

Particulars	$
Common stock, $5 par, 10,000 shares issued and outstanding	95,000
(+) Additional Paid-in capital − common stock	162,000
Total Capital Stock	257,000
Retained Earnings	411,000
Total Stockholders’ equity	668,000

Before stock split,

No. of shares outstanding = 10,000

Par Value = $5

After stock split,

Stock Split ratio = 2-for-1

No. of shares outstanding = 10,000 × 2

No. of shares outstanding = 20,000

Par Value = $52

Par Value = $2.5

Before Stock-split,

Retained Earnings = $411,000

Total Assets = $3,872,000

Shareholders’ equity = No. of shares outstanding × Par value

Shareholders’ equity = 10,000 × $5

Shareholders’ equity = $50,000

After Stock-split,

Retained Earnings = $411,000

Total Assets = $3,872,000

Shareholders’ equity = No. of shares outstanding × Par value

Shareholders’ equity = 20,000 × $2.5

Shareholders’ equity = $50,000.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 4

Question

Chapter 10, Problem 86PSB

To determine

(a)

Introduction:

Dividend is the amount that is paid to the stockholders’ periodically as a return on their investment in the company. Dividend can be made in two forms i.e. Cash Dividend and Stock Dividend.

To prepare:

Journal Entries for cash dividend and calculate value of retained earnings as well total assets.

Expert Solution

Answer to Problem 86PSB

After paying Cash dividend,

Retained Earnings = $389,000

Total Assets = $3,850,000

Journal Entries

Date	Particulars	Debit ($)	Credit ($)
December 31	Retained Earnings Dr. Dividends Payable (Declaration of cash dividend.)	22,000	22,000
December 31	Dividends Payable Dr. Cash (Payment of declared dividend.)	22,000	22,000

Explanation of Solution

Given:

Total Assets is equal to $3,872,000, common stock selling at $23 as on 31^st December 2019 and following equity statement:

Particulars	$
Common stock, $5 par, 10,000 shares issued and outstanding	95,000
(+) Additional Paid-in capital − common stock	162,000
Total Capital Stock	257,000
Retained Earnings	411,000
Total Stockholders’ equity	668,000

There are two types of dividend i.e. Stock and Cash Dividend.

The first effect of both the dividends (cash or stock) is on Retained Earnings of the company. The dividend payable amount reduces the balance in retained earnings.
The second effect of the dividend (cash or stock) is on the account through which they are paid.
If cash dividend is paid then the second effect is on cash account as cash in the company decreases.
If stock dividend is paid then the second effect is on common stock and additional paid in capital account as new shares are issued as dividends which further increase the balance of these accounts.

Before Cash Dividend was paid,

Retained Earnings = $411,000

Total Assets = $3,872,000

After payment of Cash Dividend of $22,000,

Retained Earnings = $411,000 - $22,000

Retained Earnings = $389,000

Total Assets = $3,872,000 - $22,000

Total Assets = $3,850,000.

To determine

(b)

Introduction:

Dividend is the amount that is paid to the stockholders’ periodically as a return on their investment in the company. Dividend can be made in two forms i.e. Cash Dividend and Stock Dividend.

To prepare:

Journal Entry for stock dividend and calculate value of retained earnings as well total assets.

Expert Solution

Answer to Problem 86PSB

After paying Stock dividend,

Retained Earnings = $383,400

Total Assets (will remain same) = $3,872,000

Journal Entries

Date	Particulars	Debit ($)	Credit ($)
December 31	Retained Earnings Dr. Common Stock Additional Paid-in Capital (Declaration of cash dividend.)	27,600	6,000 21,600

Explanation of Solution

Given:

Total Assets is equal to $3,872,000, common stock selling at $23 as on 31^st December 2019 and following equity statement:

Particulars	$
Common stock, $5 par, 10,000 shares issued and outstanding	95,000
(+) Additional Paid-in capital − common stock	162,000
Total Capital Stock	257,000
Retained Earnings	411,000
Total Stockholders’ equity	668,000

There are two types of dividend i.e. Stock and Cash Dividend.

The first effect of both the dividends (cash or stock) is on Retained Earnings of the company. The dividend payable amount reduces the balance in retained earnings.
The second effect of the dividend (cash or stock) is on the account through which they are paid.
If cash dividend is paid then the second effect is on cash account as cash in the company decreases.
If stock dividend is paid then the second effect is on common stock and additional paid in capital account as new shares are issued as dividends which further increase the balance of these accounts.

No. of shares outstanding = 10,000

Stock Dividend = 12%

Stock Dividend = 1,200 shares

Total Par value of stock dividend = Stock Dividend × Par value

Total Par value of stock dividend = 1,200 × $5

Total Par value of stock dividend = $6,000

Total Market value of stock dividend = Stock Dividend × Stock Price

Total Market value of stock dividend = 1,200 × $23

Total Market value of stock dividend = $27,600

Additional Paid in capital = $27,600 - $6,000

Additional Paid in capital = $21,600

Before Stock Dividend was paid,

Retained Earnings = $411,000

Total Assets = $3,872,000

After payment of Stock Dividend,

Retained Earnings = $411,000 - $$27,600

Retained Earnings = $383,400

Total Assets (will remain same) = $3,872,000.

To determine

(c)

Introduction:

In stock split, shares outstanding increases by given ratio and the price of stock decreases by the same ratio wherein the total stockholders’ equity remains unchanged.

To state:

Whether journal entry will be recorded for stock split and the value of retained earnings as well total assets.

Expert Solution

Answer to Problem 86PSB

After Stock-split,

Retained Earnings = $411,000

Total Assets = $3,872,000

Stock split doesn’t affect the Total assets as well retained earnings. Thus, they remain same. It only affects no. of shares outstanding and price per share (still stockholders’ equity remains unchanged).

Since there is no actual change in stockholders’ equity or balance sheet as a whole, hence no journal entry is required for stock split.

Explanation of Solution

Given:

Total Assets is equal to $3,872,000, common stock selling at $23 as on 31^st December 2019 and following equity statement:

Particulars	$
Common stock, $5 par, 10,000 shares issued and outstanding	95,000
(+) Additional Paid-in capital − common stock	162,000
Total Capital Stock	257,000
Retained Earnings	411,000
Total Stockholders’ equity	668,000

Before stock split,

No. of shares outstanding = 10,000

Par Value = $5

After stock split,

Stock Split ratio = 2-for-1

No. of shares outstanding = 10,000 × 2

No. of shares outstanding = 20,000

Par Value = $52

Par Value = $2.5

Before Stock-split,

Retained Earnings = $411,000

Total Assets = $3,872,000

Shareholders’ equity = No. of shares outstanding × Par value

Shareholders’ equity = 10,000 × $5

Shareholders’ equity = $50,000

After Stock-split,

Retained Earnings = $411,000

Total Assets = $3,872,000

Shareholders’ equity = No. of shares outstanding × Par value

Shareholders’ equity = 20,000 × $2.5

Shareholders’ equity = $50,000.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 10, Problem 86PSB

To determine

(a)

Introduction:

Dividend is the amount that is paid to the stockholders’ periodically as a return on their investment in the company. Dividend can be made in two forms i.e. Cash Dividend and Stock Dividend.

To prepare:

Journal Entries for cash dividend and calculate value of retained earnings as well total assets.

Expert Solution

Answer to Problem 86PSB

After paying Cash dividend,

Retained Earnings = $389,000

Total Assets = $3,850,000

Journal Entries

Date	Particulars	Debit ($)	Credit ($)
December 31	Retained Earnings Dr. Dividends Payable (Declaration of cash dividend.)	22,000	22,000
December 31	Dividends Payable Dr. Cash (Payment of declared dividend.)	22,000	22,000

Explanation of Solution

Given:

Total Assets is equal to $3,872,000, common stock selling at $23 as on 31^st December 2019 and following equity statement:

Particulars	$
Common stock, $5 par, 10,000 shares issued and outstanding	95,000
(+) Additional Paid-in capital − common stock	162,000
Total Capital Stock	257,000
Retained Earnings	411,000
Total Stockholders’ equity	668,000

There are two types of dividend i.e. Stock and Cash Dividend.

The first effect of both the dividends (cash or stock) is on Retained Earnings of the company. The dividend payable amount reduces the balance in retained earnings.
The second effect of the dividend (cash or stock) is on the account through which they are paid.
If cash dividend is paid then the second effect is on cash account as cash in the company decreases.
If stock dividend is paid then the second effect is on common stock and additional paid in capital account as new shares are issued as dividends which further increase the balance of these accounts.

Before Cash Dividend was paid,

Retained Earnings = $411,000

Total Assets = $3,872,000

After payment of Cash Dividend of $22,000,

Retained Earnings = $411,000 - $22,000

Retained Earnings = $389,000

Total Assets = $3,872,000 - $22,000

Total Assets = $3,850,000.

To determine

(b)

Introduction:

Dividend is the amount that is paid to the stockholders’ periodically as a return on their investment in the company. Dividend can be made in two forms i.e. Cash Dividend and Stock Dividend.

To prepare:

Journal Entry for stock dividend and calculate value of retained earnings as well total assets.

Expert Solution

Answer to Problem 86PSB

After paying Stock dividend,

Retained Earnings = $383,400

Total Assets (will remain same) = $3,872,000

Journal Entries

Date	Particulars	Debit ($)	Credit ($)
December 31	Retained Earnings Dr. Common Stock Additional Paid-in Capital (Declaration of cash dividend.)	27,600	6,000 21,600

Explanation of Solution

Given:

Total Assets is equal to $3,872,000, common stock selling at $23 as on 31^st December 2019 and following equity statement:

Particulars	$
Common stock, $5 par, 10,000 shares issued and outstanding	95,000
(+) Additional Paid-in capital − common stock	162,000
Total Capital Stock	257,000
Retained Earnings	411,000
Total Stockholders’ equity	668,000

There are two types of dividend i.e. Stock and Cash Dividend.

The first effect of both the dividends (cash or stock) is on Retained Earnings of the company. The dividend payable amount reduces the balance in retained earnings.
The second effect of the dividend (cash or stock) is on the account through which they are paid.
If cash dividend is paid then the second effect is on cash account as cash in the company decreases.
If stock dividend is paid then the second effect is on common stock and additional paid in capital account as new shares are issued as dividends which further increase the balance of these accounts.

No. of shares outstanding = 10,000

Stock Dividend = 12%

Stock Dividend = 1,200 shares

Total Par value of stock dividend = Stock Dividend × Par value

Total Par value of stock dividend = 1,200 × $5

Total Par value of stock dividend = $6,000

Total Market value of stock dividend = Stock Dividend × Stock Price

Total Market value of stock dividend = 1,200 × $23

Total Market value of stock dividend = $27,600

Additional Paid in capital = $27,600 - $6,000

Additional Paid in capital = $21,600

Before Stock Dividend was paid,

Retained Earnings = $411,000

Total Assets = $3,872,000

After payment of Stock Dividend,

Retained Earnings = $411,000 - $$27,600

Retained Earnings = $383,400

Total Assets (will remain same) = $3,872,000.

To determine

(c)

Introduction:

In stock split, shares outstanding increases by given ratio and the price of stock decreases by the same ratio wherein the total stockholders’ equity remains unchanged.

To state:

Whether journal entry will be recorded for stock split and the value of retained earnings as well total assets.

Expert Solution

Answer to Problem 86PSB

After Stock-split,

Retained Earnings = $411,000

Total Assets = $3,872,000

Stock split doesn’t affect the Total assets as well retained earnings. Thus, they remain same. It only affects no. of shares outstanding and price per share (still stockholders’ equity remains unchanged).

Since there is no actual change in stockholders’ equity or balance sheet as a whole, hence no journal entry is required for stock split.

Explanation of Solution

Given:

Total Assets is equal to $3,872,000, common stock selling at $23 as on 31^st December 2019 and following equity statement:

Particulars	$
Common stock, $5 par, 10,000 shares issued and outstanding	95,000
(+) Additional Paid-in capital − common stock	162,000
Total Capital Stock	257,000
Retained Earnings	411,000
Total Stockholders’ equity	668,000

Before stock split,

No. of shares outstanding = 10,000

Par Value = $5

After stock split,

Stock Split ratio = 2-for-1

No. of shares outstanding = 10,000 × 2

No. of shares outstanding = 20,000

Par Value = $52

Par Value = $2.5

Before Stock-split,

Retained Earnings = $411,000

Total Assets = $3,872,000

Shareholders’ equity = No. of shares outstanding × Par value

Shareholders’ equity = 10,000 × $5

Shareholders’ equity = $50,000

After Stock-split,

Retained Earnings = $411,000

Total Assets = $3,872,000

Shareholders’ equity = No. of shares outstanding × Par value

Shareholders’ equity = 20,000 × $2.5

Shareholders’ equity = $50,000.

Answer 6

Chapter 10, Problem 86PSB

To determine

(a)

Introduction:

Dividend is the amount that is paid to the stockholders’ periodically as a return on their investment in the company. Dividend can be made in two forms i.e. Cash Dividend and Stock Dividend.

To prepare:

Journal Entries for cash dividend and calculate value of retained earnings as well total assets.

Expert Solution

Answer to Problem 86PSB

After paying Cash dividend,

Retained Earnings = $389,000

Total Assets = $3,850,000

Journal Entries

Date	Particulars	Debit ($)	Credit ($)
December 31	Retained Earnings Dr. Dividends Payable (Declaration of cash dividend.)	22,000	22,000
December 31	Dividends Payable Dr. Cash (Payment of declared dividend.)	22,000	22,000

Explanation of Solution

Given:

Total Assets is equal to $3,872,000, common stock selling at $23 as on 31^st December 2019 and following equity statement:

Particulars	$
Common stock, $5 par, 10,000 shares issued and outstanding	95,000
(+) Additional Paid-in capital − common stock	162,000
Total Capital Stock	257,000
Retained Earnings	411,000
Total Stockholders’ equity	668,000

There are two types of dividend i.e. Stock and Cash Dividend.

The first effect of both the dividends (cash or stock) is on Retained Earnings of the company. The dividend payable amount reduces the balance in retained earnings.
The second effect of the dividend (cash or stock) is on the account through which they are paid.
If cash dividend is paid then the second effect is on cash account as cash in the company decreases.
If stock dividend is paid then the second effect is on common stock and additional paid in capital account as new shares are issued as dividends which further increase the balance of these accounts.

Before Cash Dividend was paid,

Retained Earnings = $411,000

Total Assets = $3,872,000

After payment of Cash Dividend of $22,000,

Retained Earnings = $411,000 - $22,000

Retained Earnings = $389,000

Total Assets = $3,872,000 - $22,000

Total Assets = $3,850,000.

Answer 7

Chapter 10, Problem 86PSB

To determine

(a)

Introduction:

Dividend is the amount that is paid to the stockholders’ periodically as a return on their investment in the company. Dividend can be made in two forms i.e. Cash Dividend and Stock Dividend.

To prepare:

Journal Entries for cash dividend and calculate value of retained earnings as well total assets.

Answer 8

Expert Solution

Answer to Problem 86PSB

After paying Cash dividend,

Retained Earnings = $389,000

Total Assets = $3,850,000

Journal Entries

Date	Particulars	Debit ($)	Credit ($)
December 31	Retained Earnings Dr. Dividends Payable (Declaration of cash dividend.)	22,000	22,000
December 31	Dividends Payable Dr. Cash (Payment of declared dividend.)	22,000	22,000

Answer 9

Expert Solution

Answer 10

Expert Solution

Answer 11

Expert Solution

Answer 12

Explanation of Solution

Given:

Total Assets is equal to $3,872,000, common stock selling at $23 as on 31^st December 2019 and following equity statement:

Particulars	$
Common stock, $5 par, 10,000 shares issued and outstanding	95,000
(+) Additional Paid-in capital − common stock	162,000
Total Capital Stock	257,000
Retained Earnings	411,000
Total Stockholders’ equity	668,000

There are two types of dividend i.e. Stock and Cash Dividend.

The first effect of both the dividends (cash or stock) is on Retained Earnings of the company. The dividend payable amount reduces the balance in retained earnings.
The second effect of the dividend (cash or stock) is on the account through which they are paid.
If cash dividend is paid then the second effect is on cash account as cash in the company decreases.
If stock dividend is paid then the second effect is on common stock and additional paid in capital account as new shares are issued as dividends which further increase the balance of these accounts.

Before Cash Dividend was paid,

Retained Earnings = $411,000

Total Assets = $3,872,000

After payment of Cash Dividend of $22,000,

Retained Earnings = $411,000 - $22,000

Retained Earnings = $389,000

Total Assets = $3,872,000 - $22,000

Total Assets = $3,850,000.

Answer 13

To determine

(b)

Introduction:

Dividend is the amount that is paid to the stockholders’ periodically as a return on their investment in the company. Dividend can be made in two forms i.e. Cash Dividend and Stock Dividend.

To prepare:

Journal Entry for stock dividend and calculate value of retained earnings as well total assets.

Expert Solution

Answer to Problem 86PSB

After paying Stock dividend,

Retained Earnings = $383,400

Total Assets (will remain same) = $3,872,000

Journal Entries

Date	Particulars	Debit ($)	Credit ($)
December 31	Retained Earnings Dr. Common Stock Additional Paid-in Capital (Declaration of cash dividend.)	27,600	6,000 21,600

Explanation of Solution

Given:

Total Assets is equal to $3,872,000, common stock selling at $23 as on 31^st December 2019 and following equity statement:

Particulars	$
Common stock, $5 par, 10,000 shares issued and outstanding	95,000
(+) Additional Paid-in capital − common stock	162,000
Total Capital Stock	257,000
Retained Earnings	411,000
Total Stockholders’ equity	668,000

There are two types of dividend i.e. Stock and Cash Dividend.

The first effect of both the dividends (cash or stock) is on Retained Earnings of the company. The dividend payable amount reduces the balance in retained earnings.
The second effect of the dividend (cash or stock) is on the account through which they are paid.
If cash dividend is paid then the second effect is on cash account as cash in the company decreases.
If stock dividend is paid then the second effect is on common stock and additional paid in capital account as new shares are issued as dividends which further increase the balance of these accounts.

No. of shares outstanding = 10,000

Stock Dividend = 12%

Stock Dividend = 1,200 shares

Total Par value of stock dividend = Stock Dividend × Par value

Total Par value of stock dividend = 1,200 × $5

Total Par value of stock dividend = $6,000

Total Market value of stock dividend = Stock Dividend × Stock Price

Total Market value of stock dividend = 1,200 × $23

Total Market value of stock dividend = $27,600

Additional Paid in capital = $27,600 - $6,000

Additional Paid in capital = $21,600

Before Stock Dividend was paid,

Retained Earnings = $411,000

Total Assets = $3,872,000

After payment of Stock Dividend,

Retained Earnings = $411,000 - $$27,600

Retained Earnings = $383,400

Total Assets (will remain same) = $3,872,000.

Answer 14

To determine

(b)

Introduction:

Dividend is the amount that is paid to the stockholders’ periodically as a return on their investment in the company. Dividend can be made in two forms i.e. Cash Dividend and Stock Dividend.

To prepare:

Journal Entry for stock dividend and calculate value of retained earnings as well total assets.

Answer 15

Expert Solution

Answer to Problem 86PSB

After paying Stock dividend,

Retained Earnings = $383,400

Total Assets (will remain same) = $3,872,000

Journal Entries

Date	Particulars	Debit ($)	Credit ($)
December 31	Retained Earnings Dr. Common Stock Additional Paid-in Capital (Declaration of cash dividend.)	27,600	6,000 21,600

Answer 16

Expert Solution

Answer 17

Expert Solution

Answer 18

Expert Solution

Answer 19

Explanation of Solution

Given:

Total Assets is equal to $3,872,000, common stock selling at $23 as on 31^st December 2019 and following equity statement:

Particulars	$
Common stock, $5 par, 10,000 shares issued and outstanding	95,000
(+) Additional Paid-in capital − common stock	162,000
Total Capital Stock	257,000
Retained Earnings	411,000
Total Stockholders’ equity	668,000

There are two types of dividend i.e. Stock and Cash Dividend.

The first effect of both the dividends (cash or stock) is on Retained Earnings of the company. The dividend payable amount reduces the balance in retained earnings.
The second effect of the dividend (cash or stock) is on the account through which they are paid.
If cash dividend is paid then the second effect is on cash account as cash in the company decreases.
If stock dividend is paid then the second effect is on common stock and additional paid in capital account as new shares are issued as dividends which further increase the balance of these accounts.

No. of shares outstanding = 10,000

Stock Dividend = 12%

Stock Dividend = 1,200 shares

Total Par value of stock dividend = Stock Dividend × Par value

Total Par value of stock dividend = 1,200 × $5

Total Par value of stock dividend = $6,000

Total Market value of stock dividend = Stock Dividend × Stock Price

Total Market value of stock dividend = 1,200 × $23

Total Market value of stock dividend = $27,600

Additional Paid in capital = $27,600 - $6,000

Additional Paid in capital = $21,600

Before Stock Dividend was paid,

Retained Earnings = $411,000

Total Assets = $3,872,000

After payment of Stock Dividend,

Retained Earnings = $411,000 - $$27,600

Retained Earnings = $383,400

Total Assets (will remain same) = $3,872,000.

Answer 20

To determine

(c)

Introduction:

In stock split, shares outstanding increases by given ratio and the price of stock decreases by the same ratio wherein the total stockholders’ equity remains unchanged.

To state:

Whether journal entry will be recorded for stock split and the value of retained earnings as well total assets.

Expert Solution

Answer to Problem 86PSB

After Stock-split,

Retained Earnings = $411,000

Total Assets = $3,872,000

Stock split doesn’t affect the Total assets as well retained earnings. Thus, they remain same. It only affects no. of shares outstanding and price per share (still stockholders’ equity remains unchanged).

Since there is no actual change in stockholders’ equity or balance sheet as a whole, hence no journal entry is required for stock split.

Explanation of Solution

Given:

Total Assets is equal to $3,872,000, common stock selling at $23 as on 31^st December 2019 and following equity statement:

Particulars	$
Common stock, $5 par, 10,000 shares issued and outstanding	95,000
(+) Additional Paid-in capital − common stock	162,000
Total Capital Stock	257,000
Retained Earnings	411,000
Total Stockholders’ equity	668,000

Before stock split,

No. of shares outstanding = 10,000

Par Value = $5

After stock split,

Stock Split ratio = 2-for-1

No. of shares outstanding = 10,000 × 2

No. of shares outstanding = 20,000

Par Value = $52

Par Value = $2.5

Before Stock-split,

Retained Earnings = $411,000

Total Assets = $3,872,000

Shareholders’ equity = No. of shares outstanding × Par value

Shareholders’ equity = 10,000 × $5

Shareholders’ equity = $50,000

After Stock-split,

Retained Earnings = $411,000

Total Assets = $3,872,000

Shareholders’ equity = No. of shares outstanding × Par value

Shareholders’ equity = 20,000 × $2.5

Shareholders’ equity = $50,000.

Answer 21

To determine

(c)

Introduction:

In stock split, shares outstanding increases by given ratio and the price of stock decreases by the same ratio wherein the total stockholders’ equity remains unchanged.

To state:

Whether journal entry will be recorded for stock split and the value of retained earnings as well total assets.

Answer 22

Expert Solution

Answer to Problem 86PSB

After Stock-split,

Retained Earnings = $411,000

Total Assets = $3,872,000

Stock split doesn’t affect the Total assets as well retained earnings. Thus, they remain same. It only affects no. of shares outstanding and price per share (still stockholders’ equity remains unchanged).

Since there is no actual change in stockholders’ equity or balance sheet as a whole, hence no journal entry is required for stock split.

Answer 23

Expert Solution

Answer 24

Expert Solution

Answer 25

Expert Solution

Answer 26

Explanation of Solution

Given:

Total Assets is equal to $3,872,000, common stock selling at $23 as on 31^st December 2019 and following equity statement:

Particulars	$
Common stock, $5 par, 10,000 shares issued and outstanding	95,000
(+) Additional Paid-in capital − common stock	162,000
Total Capital Stock	257,000
Retained Earnings	411,000
Total Stockholders’ equity	668,000