Squash Delight Inc. has the following balance sheet:
Assets Cash $ 70,000 Accounts receivable 257,000 Fixed assets 792,000 Total assets $ 1,119,000 Liabilities Accounts payable $ 295,000 Notes payable 51,000 Common stock (80,000 shares @ $2 par) 160,000 Capital in excess of par 100,000 Retained earnings 513,000 Total liabilities & owners' equity $ 1,119,000
The firmâs stock sells for $13 a share.
a. Show the effect on the capital accounts of a two-for-one stock split. (Do not round intermediate calculations and round your answers to the nearest whole dollar.)
Common stock $ Capital excess of par $ Retained earnings $ Total equity $
b. Show the effect on the capital accounts of a 10 percent stock dividend. Part b is separate from part a. In part b do not assume the stock split has taken place. (Do not round intermediate calculations and round your answers to the nearest whole dollar.)
Common stock $ Capital excess of par $ Retained earnings $ Total equity $
c. Based on the balance in retained earnings, which of the two dividend plans is more restrictive on future cash dividends?
Stock dividend Stock split
| Squash Delight Inc. has the following balance sheet: |
| Assets | ||
| Cash | $ | 70,000 |
| Accounts receivable | 257,000 | |
| Fixed assets | 792,000 | |
| Total assets | $ | 1,119,000 |
| Liabilities | ||
| Accounts payable | $ | 295,000 |
| Notes payable | 51,000 | |
| Common stock (80,000 shares @ $2 par) | 160,000 | |
| Capital in excess of par | 100,000 | |
| Retained earnings | 513,000 | |
| Total liabilities & owners' equity | $ | 1,119,000 |
| The firmâs stock sells for $13 a share. |
| a. | Show the effect on the capital accounts of a two-for-one stock split. (Do not round intermediate calculations and round your answers to the nearest whole dollar.) |
| Common stock | $ | |
| Capital excess of par | $ | |
| Retained earnings | $ | |
| Total equity | $ | |
| b. | Show the effect on the capital accounts of a 10 percent stock dividend. Part b is separate from part a. In part b do not assume the stock split has taken place. (Do not round intermediate calculations and round your answers to the nearest whole dollar.) |
| Common stock | $ | |
| Capital excess of par | $ | |
| Retained earnings | $ | |
| Total equity | $ | |
| c. | Based on the balance in retained earnings, which of the two dividend plans is more restrictive on future cash dividends? | ||||
|
Related questions
| The owners' equity accounts for Freya International are shown here. |
| Common stock ($.60 par value) | $ | 30,000 |
| Capital surplus | 310,000 | |
| Retained earnings | 688,120 | |
| Total ownersâ equity | $ | 1,028,120 |
| a-1 | If Freya declares a three-for-one stock split, how many shares are outstanding now? (Do not round intermediate calculations.) |
| New shares outstanding |
| a-2 | What is the new par value per share? (Do not round intermediate calculations. Round your answer to 3 decimal places, e.g., 32.161.) |
| New par value | $ per share |
| b-1 | If Freya declares a one-for-four reverse stock split, how many shares are outstanding now? (Do not round intermediate calculations.) |
| New shares outstanding |
| b-2 | What is the new par value per share? (Do not round intermediate calculations. Round your answer to 2 decimal places, e.g., 32.16.) |
| New par value | $ per share |
3.
| The owners' equity accounts for Freya International are shown here. |
| Common stock ($.40 par value) | $ | 20,000 |
| Capital surplus | 290,000 | |
| Retained earnings | 648,120 | |
| Total ownersâ equity | $ | 958,120 |
| a-1 | If Freya declares a two-for-one stock split, how many shares are outstanding now? (Do not round intermediate calculations.) |
| New shares outstanding |
| a-2 | What is the new par value per share? (Do not round intermediate calculations. Round your answer to 3 decimal places, e.g., 32.161.) |
| New par value | $ per share |
| b-1 | If Freya declares a one-for-four reverse stock split, how many shares are outstanding now? (Do not round intermediate calculations.) |
| New shares outstanding |
| b-2 | What is the new par value per share? (Do not round intermediate calculations. Round your answer to 2 decimal places, e.g., 32.16.) |
| New par value | $ per share |
