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Chapter 13: Q11SE_1 (page 710)

Accounting for a stock split

Decor and More Imports recently reported the following stockholders’ equity:

Common Stock—\(1 Par Value; 490,000,000 shares

authorized, 119,000,000 shares issued and outstanding

Paid-In Capital:

654,000,000

\) 119,000,000

267,000,000

Retained Earnings

Total Stockholders’ Equity \( 921,000,000

Stockholders’ Equity

Paid-In Capital in Excess of Par—Common 148,000,000

Total Paid-In Capital

Suppose Decor and More split its common stock 2-for-1 in order to decrease the market price per share of its stock. The company’s stock was trading at \)17 per share immediately before the split.

Requirements

1. Prepare the stockholders’ equity section of the Decor and More Imports balance sheet after the stock split.

Short Answer

Expert verified

The stockholders’ equity section of the balance sheet after the stock split shows $92,10,00,000 amount of total Shareholder’s Equity.

Step by step solution

01

Basic Introduction

Balance sheet is a financial statement that represents the value of assets, liabilities, and owners’ equity of a corporate at the end of the financial year.

02

Balance sheet (Partial)

Décor and More Imports

Balance sheet (Partial)

Shareholder’s equity

Paid-in capital

Common Stock—$1 Par Value; 490,000,000 sharesauthorized, 119,000,000 shares issued and outstanding

$11,90,00,000

Paid-In Capital in Excess of Par—Common

$14,80,00,000

$26,70,00,000

Add: Retained earnings

$65,40,00,000

Total Shareholder’s Equity

$92,10,00,000

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Most popular questions from this chapter

Computing earnings per share, price/earnings ratio, and rate of return on common stockholders’ equity

Bianchi Company reported these figures for 2018 and 2017:

2018 2017

Income Statement—partial:

Net Income \( 34,380 \) 18,000

Dec. 31, 2018 Dec. 31, 2017

Balance Sheet—partial:

Total Assets \( 285,000 \) 280,000

Paid-In Capital:

Preferred Stock—11%, \(9 Par Value; 60,000 shares

authorized, 12,000 shares issued and outstanding

\) 108,000 \( 108,000

Common Stock—\)2 Par Value; 60,000 shares

authorized, 50,000 shares issued and outstanding

100,000 100,000

Paid-In Capital in Excess of Par—Common 14,000 14,000

Retained Earnings 60,500 38,000

Total Stockholders’ Equity \( 282,500 \) 260,000

Requirements

3. Compute Bianchi Company’s rate of return on common stockholders’ equity for 2018. Assume the company paid the minimum preferred dividend during 2018. Round to the nearest whole percent.

Eates Corp. issued 8,000 shares of no-par common stock for \(13 per share.

Requirements

1. Record issuance of the stock if the stock:

a. is true no-par stock.

b. has stated value of \)3 per share.

Question: Accounting for the purchase and sale of treasury stock

Discount Furniture, Inc. completed the following treasury stock transactions in 2018:

Dec. 1 Purchased 1,900 shares of the company’s \(1 par value common stock as treasury stock, paying cash of \)5 per share.

15 Sold 200 shares of the treasury stock for cash of \(8 per share.

20 Sold 1,000 shares of the treasury stock for cash of \)1 per share. (Assume the balance in Paid-In Capital from Treasury Stock Transactions on December 20 is $2,400.)

Requirements

2. How will Discount Furniture, Inc. report treasury stock on its balance sheet as of December 31, 2018?

Question: Journalizing a small stock dividend

Element Water Sports has 13,000 shares of \(1 par value common stock outstanding.

Element distributes a 5% stock dividend when the market value of its stock is \)15 per share.

Requirements

1. Journalize Element’s declaration of the stock dividend on August 15 and distribution on August 31.

What is treasury stock? What type of account is Treasury Stock, and what is the account’s normal balance?
See all solutions

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