Question

A summary of the transactions affecting the stockholders’ equity of Strait Corporation during the current year follows:
Prior period adjustment (net of income tax benefit) . . . . . . . . . . . . . . . . . . . . . . . . $ (80,000)
Issuance of common stock: 10,000 shares of $10 par value
capital stock at $34 per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 340,000
Declaration and distribution of 5% stock dividend (6,000 shares,
market price $36 per share) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (216,000)
Purchased 1,000 shares of treasury stock at $35 . . . . . . . . . . . . . . . . . . . . . . . . . (35,000)
Reissued 500 shares of treasury stock at a price of $36 per share . . . . . . . . . . . 18,000
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 845,000
Cash dividends declared . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (142,700)
Instructions
a. Prepare a statement of stockholders’ equity for the year. Use these column headings and beginning balances. (Notice that all additional paid-in capital accounts are combined into a single column.)


b. What was the overall effect on total stockholders’ equity of the 5 percent stock dividend of 6,000 shares? What was the overall effect on total stockholders’ equity of the cash dividends declared? Do these two events have the same impact on stockholders’ equity? Why or whynot?


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  • CreatedApril 17, 2014
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