week 2 problem 15-11

Project Description:

p15-11 (stock and cash dividends) earnhart corporation has outstanding 3,000,000 shares of common
stock of a par value of $10 each. the balance in its retained earnings account at january 1, 2010, was
$24,000,000, and it then had additional paid-in capital of $5,000,000. during 2010, the company’s net income
was $4,700,000. a cash dividend of $0.60 a share was declared on may 5, 2010, and was paid june
30, 2010, and a 6% stock dividend was declared on november 30, 2010, and distributed to stockholders
of record at the close of business on december 31, 2010. you have been asked to advise on the proper accounting
treatment of the stock dividend.

the existing stock of the company is quoted on a national stock exchange. the market price of the
stock has been as follows.
october 31, 2010 $31
november 30, 2010 $34
december 31, 2010 $38

(c) prepare the stockholders’ equity section (including schedules of retained earnings and additional
paid-in capital) of the balance sheet of earnhart corporation for the year 2010 on the basis of the
foregoing information. draft a note to the financial statements setting forth the basis of the accounting
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Price Type: Negotiable

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