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Complete the following table based on three independent cases: Case 1: The board of directors declares and pays a $6 cash dividend
Complete the following table based on three independent cases: Case 1: The board of directors declares and pays a $6 cash dividend. Case 2: The board of directors declared and issued a 50% stock dividend. Case 3: The board of directors voted a 4-for-1 stock split. Assume the market price of the stock is $19 per share. Case 1 After $6 Per Share Cash Dividend Before Stock Transactions 10,000 Case 2 After 50% Stock Dividend Case 3 After 4-for-1 Stock Split Items S 10.00 Number of shares outstanding Par value per share Common stock account Additional paid-in capital Retained earnigs Total stockholders' equity 140,000 270,000
Expert Solution
| Case 1 | Case 2 | Case 3 | ||
| Items | Before Stock Transactions | After $6 Per Share Cash Dividend | After 50% Stock Dividend | After 4-for-1 Stock Split |
| Number of shares outstanding | 10000 | 10000 | 15000 | 40000 |
| Par value per share | $ 10 | $ 10 | $ 10 | $ 2.50 |
| Common stock account | $ 1,00,000 | $ 1,00,000 | $ 1,50,000 | $ 1,00,000 |
| Additional paid in capital | $ 1,40,000 | $ 1,40,000 | $ 1,40,000 | $ 1,40,000 |
| Retained earnings | $ 2,70,000 | $ 2,10,000 | $ 2,20,000 | $ 2,70,000 |
| Total stockholder's equity | $ 5,10,000 | $ 4,50,000 | $ 5,10,000 | $ 5,10,000 |
Case 1 :-
Decrease Retained earnings by $60000 (Dividend amount)
$270000 - $60000 = $210000
Case 2:-
50% stock dividend = 10000 shares * 50% = 5000 shares
Total shares = 10000 + 5000 = 15000
Decrease Retained earnings by Stock dividend i.e $50000 (5000 shares * $10)
$270000 - $50000 = $220000
Case 3:-
Stock split 4 for 1
Total shares = 4 * 10000 = 40000
Par value per share = $10/4 = $2.50
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