Question

Gibbs Corp. has 1,000,000 authorized shares of $1 par value common stock, of which 475,000 are currently issued and 425,000 are outstanding. The following events are related to Gibbs Corp.’s common stock.
• On November 1, 2007, Gibbs Corp. declared a 10 percent stock dividend to all shareholders of record on November 30, distributable on December 30. At the time of the declaration, the stock was trading at $50 per share.
• On October 8, 2008, Gibbs Corp. declared a 4:1 stock split. At the time of the split, the stock was trading at $90 per share.
• On November 5, 2009, Gibbs Corp. declared a $1 per share cash dividend to all shareholders of record on November 30, payable on December 30. At the time of the declaration, the stock was trading at $25 per share.
Required:
(a) Calculate the following amounts after each event took place:
(1) Number of shares authorized
(2) Number of shares issued
(3) Number of shares outstanding.
(4) Number of shares in treasury
(5) Par value per share
(6) Balance in the common stock account
(b) Prepare the journal entries associated with each event.
(c) Why might Gibbs Corp. have declared a stock dividend in 2007 rather than a cash dividend?
(d) Why might Gibbs Corp. have split its stock in 2008?


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  • CreatedMarch 27, 2015
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