Exercise 14-4 On October 31, the stockholders\' equity section of Heins Company
ID: 2550841 • Letter: E
Question
Exercise 14-4 On October 31, the stockholders' equity section of Heins Company consists of common stock $ action: (1) declaring a 4% stock dividend on the 27,500, market price is $14 per share. s considering the following two courses of $10 par value shares outstanding, or (2) effecting a 2-for-1 stock split that will reduce par value to $5 per share. The current Prepare a tabular summary of the effects of the alternative actions on the components of stockholders' equity outstanding shares, and par value per share Before Action After Stock Dividend After Stock Split Stockholders' equity Paid-in capital Common stock In excess of par Total paid-in capital Retained earnings equity Outstanding shares Par value per share Total stockholders
Explanation / Answer
4% Stock dividend 2 for 1 stock split General Stockholder's Equity Paid Up capital Common stock at par 275000 286000 275000 In excess of par 4400 Total paid up capital 275000 290400 275000 Retained Earnings 885000 869600 885000 Total Stockholders's Equity 1160000 1160000 1160000 Outstanding shares 27500 28600 55000 Par value per share 10 10 5 Outstanding stock 27500 4% stock dividend 1100 Market value of share 14 To Common stock 11000 To in excess of par 4400 stock Split 02:01 Outstanding stock 27500 split 55000 Preference stock dividend 5% 2016 2017 2018 Common Stock 1020000 1020000 1020000 preference stock 102500 102500 102500 Total Cash dividend 4625 13500 28500 Allocation to preference Stock 4625 5125 5125 Allocation to common Stock 0 8375 23375 Preference stock dividend 8% 2016 2017 2018 Common Stock 1020000 1020000 1020000 preference stock 102500 102500 102500 Total Cash dividend 4625 13500 28500 Allocation to preference Stock 4625 8200 8200 Allocation to common Stock 0 5300 20300 Journal Entry debit Preference Shareholders ac 4625 8200 8200 debit Equity share holders ac 0 5300 20300 credit bank/cash 4625 13500 28500
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