Exercise 13-5 Stock dividends and splits LO P2 On June 30, 2017, Sharper Corpora

Question

Exercise 13-5 Stock dividends and splits LO P2

On June 30, 2017, Sharper Corporation’s common stock is priced at $28.50 per share before any stock dividend or split, and the stockholders’ equity section of its balance sheet appears as follows.

1. Assume that the company declares and immediately distributes a 100% stock dividend. This event is recorded by capitalizing retained earnings equal to the stock’s par value. Answer these questions about stockholders’ equity as it exists after issuing the new shares.
a.,b.& c. Complete the below table to calculate the retained earnings balance, total stockholders’ equity and number of outstanding shares.
2. Assume that the company implements a 2-for-1 stock split instead of the stock dividend in part 1. Answer these questions about stockholders’ equity as it exists after issuing the new shares.
a.,b.& c. Complete the below table to calculate the retained earnings balance, total stockholders’ equity and number of outstanding shares.

Common stock-$8 par value, 85,000 shares authorized, 34,000 shares issued and outstanding Paid-in capital in excess of par value, common stock Retained earnings $272,000 100,000 372,000 Total stockholders' equity $ 744,000

Explanation / Answer

1) Complete the below table to calculate the retained earnings balance, total stockholders’ equity and number of outstanding shares. (Amount in $ ) Stock Dividend Before stock dividend Impact of stock dividend After stock dividend Common stock 272000 272000 544000 paid in capital excess of par value 100000 100000 Total contributed capital 372000 272000 644000 Retained earnings 372000 -272000 100000 Total stockholder's equity 744000 0 744000 No of common shares outstanding 34000 34000 68000 Retained earnings : Before dividend 372000 $8 par value of 30000 shares' -272000 After dividend 100000 Total stock holders equity : Common stock $ 8 par value, 75000 shares authorize 68000 shares issued and outstanding 544000 Paid in capital excess of par value 100000 Retained earnings 100000 Total stock holders equity 744000 Number of outstanding shares : Outstanding shares before dividend 34000 Dividend shares 34000 Outstanding shares after dividend 68000 2) Complete the below table to calculate the retained earnings balance, total stockholders’ equity and number of outstanding shares. (Amount in $ ) Stock split Before stock split Impact of stock split After stock split Common stock 272000 272000 paid in capital excess of par value 100000 100000 Total contributed capital 372000 372000 Retained earnings 372000 372000 Total stockholder's equity 744000 744000 No of common shares outstanding 34000 34000 68000 Retained earnings Before and after stock split 372000 Total stock holders equity : Common stock $ 4 par value,170000 share 68000, shares issued and outstanding 272000 paid in capital excess of par value 100000 Retained earnings 372000 Total stockholder's equity 744000 number of outstanding shares : Outstanding shares before split 34000 Additional split shares 34000 Outstanding shares after split 68000

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