Dividends, stock splits, and stockholders’ equity
P6.The stockholders’ equity section of Minh, Inc.’s balance sheet as of December 31, 2013, follows.
Contributed capital:
|
Common stock, $3 par value, 1,000,000 shares authorized, 80,000 shares issued and outstanding |
$240,000 |
|
|
Additional paid-in capital |
75,000 |
|
|
Total contributed capital |
$315,000 |
|
|
Retained earnings |
240,000 |
|
|
Total stockholders’ equity |
$555,000 |
A review of Minh’s stockholders’ equity records disclosed the following transactions during 2014:
Mar. 25 The board of directors declared a 5 percent stock dividend to stockholders of record on April 20 to be distributed on May 1. The market value of the common stock was $21 per share.
Apr. 20 Date of record for stock dividend. May 1 Issued stock dividend.
Sept. 10 Declared a 3-for-1 stock split.
Dec. 15 Declared a 10 percent stock dividend to stockholders of record on January 15 to be distributed on February 15. The market price on this date is $9 per share.
reQUIreD
1. Record the stockholders’ equity components of these transactions using T accounts.
2. Prepare the stockholders’ equity section of Minh’s balance sheet as of December 31, 2014. Assume net income for 2014 is $494,000.
3. aCCountingConneCtion▶ If you owned 2,000 shares of Minh stock on March 1, 2014, how many shares would you own on February 15, 2015? Would your pro- portionate share of the ownership of the company be different on the latter date from what it was on the former date? Explain your answer.
