Assignment 11-2 – Work Exercise 11-10 – Stock Dividends – NAM Tyler Cheatham
Analyze the company’s Stockholder’s Equity information: Use this to figure out number of shares outstanding
Common Stock (400,000) shares authorized, 300,000 shares issued), $18 par = $ 5,400,000 Paid in capital in Excess of Par = 1,500,000 Retained Earnings = $ 78,000,000 NOTE: Do you see any mention of Treasury Stock? NO! So, the shares issues will = shares outstanding.
Next, calculate data about stock dividend: given this – 5% stock dividend when market @ $40
1. Shares outstanding 300,000 * 5% = 15,000*$40 new shares
2. Market value of new shares = 15,000 new shares * $18 = $270,000
3. Par value of new shares =
15,000 new shares * $ 22 = $ 330,000 Next, make the entry for the Date of Declaration: Important rule to know: Dividends reduce Retained Earnings when the company closes their
Then, make the entry for the Date of Distribution: Finally, analyze the effect of the stock dividend on Stockholder’s Equity
Start with the data at the top of this page
$_____________ Then add or subtract changes caused by your entries
+ _____________________ = _____________________ PIC $_____________ + _____________________ = _____________________ Retained Earnings $_____________ – _____________________ = _____________________
(remember RE is reduced by amount of dividend) 4
Total Before = $_____________________ Total After = $_____________________ Healthy Living Co. is an HMO for businesses in the Seattle area. The following account balances appear on the balance sheet of Healthy Living Co.: Common stock (400,000 shares authorized; 300,000 shares issued), $18 par, $5,400,000; Paidin capital in excess of par common stock, $1,500,000; and Retained earnings, $78,000,000. The board of directors declared a 5% stock dividend when the market price of the stock was $40 a share. Healthy Living Co. reported no income or loss for the current year.
a1. Journalize the entry to record the declaration of the dividend, capitalizing an amount equal to market value.
a2. Journalize the entry to record the issuance of the stock certificates.
b. Determine the following amounts before the stock dividend was declared: (1) total paidin capital, (2) total retained earnings, and (3) total stockholders’ equity.
c. Determine the following amounts after the stock dividend was declared and closing entries were recorded at the end of the year: (1) total paidin capital, (2) total retained earnings, and (3) total stockholders’ equity.
Assignment 11-3. Exercise 11-11 Treasury Stock Name Tyler Cheatham Start by reading Exercise 11 in the book. (page 526)
**Treasury stock is the name for a company’s stock that the Board has re-purchased from shareholders.
Make the entries:
March 4 – company purchased 33,000 shares of its common stock and paid $84 per share
Important thing to remember:
How much did they pay per share?___ Aug 27 – company resold 25,000 of these shares for $90 per share
Important things to remember:
TS comes “out” of Treasury Stock at the
same price that it went “in” to Treasury
You can ALWAYS credit PIC from TS
Nov 11 – company resold the last 8,000 of the TS shares for $80 per share
(Hint, save the middle row for last!)
Another Important thing to remember:
You can only debit PIC from TS up to the
amount it has previously been credited. Treasury Stock Transactions
Crystal Lake Inc. bottles and distributes spring water. On March 4 of the current year, Crystal Lake reacquired 33,000 shares of its common stock at $84 per share. On August 27, Crystal Lake Inc. sold 25,000 of the reacquired shares at $90 per share. The remaining 8,000 shares were sold at $80 per share on November 11.