The owners’ equity accounts for Trans World International are shown here: Common

Question

The owners’ equity accounts for Trans World International are shown here:   Common stock ($1 par value) $ 110,000   Capital surplus 209,000   Retained earnings 690,000   Total owners’ equity $ 1,009,000 Requirement 1: Assume Trans World stock currently sells for $22 per share and a stock dividend of 20 percent is declared. (a) How many new shares will be distributed? (b) Show the new balance for each equity account.   Common stock ?   Capital surplus ?   Retained earnings ?   Total owners’ equity ? Requirement 2: Now assume that instead Trans World declares a stock dividend of 25 percent. (a) How many new shares will be distributed?   New shares issued?    (b) Show the new balance for each equity account.   Common stock ?   Capital surplus ?   Retained earnings ?   Total owners’ equity ? The owners’ equity accounts for Trans World International are shown here:

Explanation / Answer

Reqmt 1 No of Shares (110,000/1)            110,000.00 Stock Dividend @20% = 110000*20%              22,000.00 Common Stock (110,000+22,000)            132,000.00 Capital Surplus(209,000+ 22,000*21)            671,000.00 Retained Earnings (690000 - 22000*22)            206,000.00 Total owners’ equity        1,009,000.00 Reqmt 2 No of Shares (110,000/1)            110,000.00 Stock Dividend @25% = 110000*25%              27,500.00 Common Stock (110,000+27,500)            137,500.00 Capital Surplus(209,000+ 27500*21)            786,500.00 Retained Earnings (690000 - 27500*22)              85,000.00 Total owners’ equity        1,009,000.00

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