The Western Pipe Company has the following capital section in its balance sheet. Its stock is currently selling for $6 per share.
Common stock (50,000 shares at $2 par) $100,000
Capital in excess of par $100,000
Retained earnings $250,000
Net worth $450,000
The firm intends to first declare a 15 percent stock dividend and then pay a 25-cent cash dividend (which also causes a reduction of retained earnings). Show the capital section of the balance sheet after the first transaction and then after the second transaction.
The Western Pipe Company has the following capital section in its balance sheet. Its stock is currently selling for $6 per share.
Common stock (50,000 shares at $2 par) $100,000
Capital in excess of par $100,000
Retained earnings $250,000
Net worth $450,000
The firm intends to first declare a 15 percent stock dividend and then pay a 25-cent cash dividend (which also causes a reduction of retained earnings). Show the capital section of the balance sheet after the first transaction and then after the second transaction.
Related questions
| 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? | ||||
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