1. Analyze the effects of alternative distributions on stockholders\' equity. Ca
ID: 2511023 • Letter: 1
Question
1. Analyze the effects of alternative distributions on stockholders' equity. Cash dividends, stock dividends, and stock splits Exce HOME INSERT PAGE LAYOUT FORMULAS DATA REVIEW VIEW Sign In ?? A Alignment Number Conditionsl Farmat as Cell Formatting Table Styles Clipboard A1 s At December 31, Artists Unlimited Company had the following 1 At December 31, Artists Unlimited Company had the following 2stockholder's equity components that would be part of the balance sheet: 100% Stock $5,000 Cash Dividend for 1 Stock DividendSplit At Dec 31 Capital: of common shares outstanding 5,000 8 Par value per common share 9 Common Stock, at par 5,000 Additional Paid in Capital 11Total Contributed Capital 12 Retained Earnings 13 Total Stockholders' Equity 750,000 980 15 16 Required: The company is considering 3 ailternative distributions to stockholders. Consider each alternative independently of the 17 others. 18 Complete the table above and show the effect on stockholders' equity as a result of each of these distributions. 19 Use only cell references in formulas. Use cells C3, D3, and E3 as appropriate. Do not reference cells from one alternative in another alternative. 20 21 11) issue a 100% stock dividend. 22 OR 23 2) Execute a 2-for-1 stock split 24 OR 25 3) Distribute a $5,000 cash dividend. 26 27 29Explanation / Answer
Answers
No. of shares = 5000.
Stock dividend = 5000 x 100% = 5000 shares
No. of common shares will become 10,000 shares [5000 + 5000 stock dividend]
As a result, Common Stock at par will become $10,000 [$5000 + $ 5000 stock dividend]
Retained Earnings will get reduced by $ 5000 amount of stock dividend.
No. of shares will become 10,000 shares from 5,000 shares.
Par Value per common stock will become $0.5
No other changes will occur.
Only change will be that the amount of Retained earnings will get reduced by $ 5,000
Stockholder's Equity
100% stock dividend
2 for 1 stock split
$ 5000 cash dividend
Contributed Capital:
Number of common shares outstanding
5000
10000 [5000 x 100%]
10000 [5000 x (2/1)]
5000
Per Value per common share
$ 1.00
$ 1.00
$ 0.50 [$ 1 x (1/2)]
$ 1.00
Common Stock at par
$ 5,000.00
$ 10,000.00 [10000 x $1]
$ 5,000.00
$ 5,000.00
Additional Paid In capital
$ 7,45,000.00
$ 7,45,000.00
$ 7,45,000.00
$ 7,45,000.00
Total Contributed Capital
$ 7,50,000.00
$ 7,55,000.00
$ 7,50,000.00
$ 7,50,000.00
Retained Earnings
$ 9,80,000.00
$ 9,75,000.00 [980000 – 5000]
$ 9,80,000.00
$ 9,75,000.00 [980000 – 75000]
Total Stockholder's Equity
$ 17,30,000.00
$ 17,30,000.00
$ 17,30,000.00
$ 17,25,000.00
1778
C
D
E
F
G
1779
100%
2
5000
1780
Stockholder's Equity
stock dividend
for 1 stock split
cash dividend
1781
Contributed Capital:
1782
Number of common shares outstanding
5000
=+D1782+(D1782*E1779)
=+D1782*F1779
=+D1782
1783
Per Value per common share
1
=+D1783
=+D1783/F1779
=+D1783
1784
Common Stock at par
=+D1782*D1783
=+E1782*E1783
=+F1782*F1783
=+G1782*G1783
1785
Additional Paid In capital
745000
=+D1785
=+D1785
=+D1785
1786
Total Contributed Capital
=+D1784+D1785
=+E1784+E1785
=+F1784+F1785
=+G1784+G1785
1787
Retained Earnings
980000
=+D1787-(D1784*E1779)
=+D1787
=+D1787-G1779
1788
Total Stockholder's Equity
=+D1786+D1787
=+E1786+E1787
=+F1786+F1787
=+G1786+G1787
Stockholder's Equity
100% stock dividend
2 for 1 stock split
$ 5000 cash dividend
Contributed Capital:
Number of common shares outstanding
5000
10000 [5000 x 100%]
10000 [5000 x (2/1)]
5000
Per Value per common share
$ 1.00
$ 1.00
$ 0.50 [$ 1 x (1/2)]
$ 1.00
Common Stock at par
$ 5,000.00
$ 10,000.00 [10000 x $1]
$ 5,000.00
$ 5,000.00
Additional Paid In capital
$ 7,45,000.00
$ 7,45,000.00
$ 7,45,000.00
$ 7,45,000.00
Total Contributed Capital
$ 7,50,000.00
$ 7,55,000.00
$ 7,50,000.00
$ 7,50,000.00
Retained Earnings
$ 9,80,000.00
$ 9,75,000.00 [980000 – 5000]
$ 9,80,000.00
$ 9,75,000.00 [980000 – 75000]
Total Stockholder's Equity
$ 17,30,000.00
$ 17,30,000.00
$ 17,30,000.00
$ 17,25,000.00
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