Question

Firm A had the following selected Items on its balance sheet: Cash $30,000,000 Common stock (540 par, 1,400,000 shares outstanding) $6,000,000 Additional paid-in capital 7,000,000 Retained earnings 60,000,000 How would each of these accounts appear after: a. a cash dividend of $2 per share? Round the number of shares outstanding to the nearest whole number and the other answers to the nearest dollar Cash $ Common stock ($ par; shares outstanding) $ Additional paid-in capital $ Retained earnings $ b. a 6 percent stock dividend (fair market value is $80 per share)? Use the original balance sheet from the problem statement. Round the number of shares outstanding to the nearest whole nuthber and the other answers to the nearest dollar Cash Common stock (s par: shares outstanding) $ Additional paid-in capital $ Retained earnings $ c. a one-for-two reverse split? Use the original balance sheet from the problem statement. Round the number of shares outstanding to the nearest whole number and the other answers to the nearest dollar. Cash Common stock (5 Additional paid-in capital Retained earnings par; shares outstanding) $ $ $ $

Answer 1

Solution:

Requirement:a
Cash [30000000-(1400000*2)]	$      27,200,000
Common Stock	$    40	Par;	1,400,000	shares outstanding	$      56,000,000
Additional paid-in capital	$        7,000,000
Retained earnings [60000000-(1400000*2)]	$      57,200,000
Requirement:b
Cash	$      30,000,000
Common Stock	$    40	Par;	1,484,000	shares outstanding	$      59,360,000
Additional paid-in capital	$      10,360,000
Retained earnings	$      53,280,000
Requirement:c
Cash	$      30,000,000
Common Stock	$    80	Par;	700,000	shares outstanding	$      56,000,000
Additional paid-in capital	$        7,000,000
Retained earnings	$      60,000,000