Question

Squash Delight Inc. has the following balance sheet:
Assets
Cash $ 100,000
Accounts receivable 300,000
Fixed assets 600,000
Total assets $1,000,000
Liabilities
Accounts payable $ 150,000
Notes payable 50,000
Common stock (50,000 shares @ $2 par) 100,000
Capital in excess of par 200,000
Retained earnings 500,000
$1,000,000
The firm’s stock sells for $10 a share.
a. Show the effect on the capital account(s) of a two-for-one stock split.
b. Show the effect on the capital accounts of a 10 percent stock dividend. Part b is separate from part a. In part b, do not assume the stock split has taken place.
c. Based on the balance in retained earnings, which of the two dividend plans is more restrictive on future cash dividends?



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  • CreatedOctober 14, 2014
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