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1)Yakahoma Corp has 80

Accounting Oct 12, 2020

1)Yakahoma Corp has 80.000 common stocks. At the end of a profitable year it decides to pay $2 cash dividend and 5 percent stock dividend. Current stock price is $12. How much will retained earnings reduce after cash and stock dividends distributed? 

2)The unadjusted trial balance of Helena's Hire Cars is shown below (ignore GST). Helena's Hire Cars Trial Balance As at 30 June 2019 Credit Debit 18,140 21,340 640 3,880 93,600 Account Cash at bank Accounts receivable Office supplies Prepaid advertising Hire cars Accumulated Depreciation - hire cars Accounts payable Unearned hire fees Helena, Capital Helena, Drawings Hire fees revenue Wages expense Fuel and oil expense 39,400 10,800 2,260 68,340 20,600 98,700 50,620 10,680 219,500 219,500 Additional information a. b. C. d. e. Petrol purchased on credit for $680 and used during the last week in June has not been paid for or recorded. A physical count showed office supplies totalling $340 were still on hand at 30 June. Depreciation for 1 year on the hire cars is $12,400. Prepaid advertising has a balance of $600 at the end of the month. The balance in the Unearned Hire Fees account includes $1,800 received in May for hire services completed in June. Required: Prepare a 10-column worksheet for the year ended 30 June 2019.

Expert Solution

1)

Dividend is a share of profits and retained earnings that a company pays out to its shareholder.

Cash Dividend :

Cash dividend is the type of dividend in which payment of actual cash from the company directly to share holders and is the most common type of dividend

Stock Dividend :

Stock dividend, a method used by company to distribute wealth to shareholders , is a dividend payment made in the form of shares rather than cash.

Stock dividend does not increase share holders wealth.It increases the outstanding shares and decreases the price per share.

Board of directors decides when to declare dividend and in which form.

Coming to the question :

When a company issues Cash dividend, Retained earnings and cash will be reduced by the amount of cash dividend distributed to shareholders.

So an amount of $160,000 (80,000*2) will be reduced in retained earnings.

In the case of stock dividend price per share will be reduced which explained as below.

Market capitalization = $960,000 (80,000*12)

Increase in shares outstanding = 4,000 (80,000*5%)

Total Shares outstanding = 84,000 (80,000+4,000)

Price per share = 11.43 ($960,000/84,000)

Share price reduced from 12 to 11.43

2)please see the attached file.

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