Question

The shareholders’ equity section of Pioneer Enterprises as of December 31, 2015, follows:
Common stock (10,000 shares issued @ $6 par) ...... $ 60,000
Additional paid-in capital (C/S) ............. 100,000
Retained earnings .................. 60,000
Less: Treasury stock (2,000 shares @ $12) ........ (24,000)
Total shareholders’ equity ..................... $196,000
Prepare journal entries for the following independent transactions:
a. The company declares and distributes a 2 percent stock dividend on the outstanding shares. The market price of the stock is $70 per share.
b. The company declares a 3:2 stock split on the outstanding shares.
c. The company declares a 10 percent stock dividend on the outstanding shares. The market price of the stock is $80 per share.
d. The company declares a 2:1 stock split on the outstanding shares.
e. Compute the ratio of contributed capital to earned capital after independently considering each of the four actions listed above. Reduce contributed capital by the cost of the treasury stock. Comment on the difference between a stock dividend and a stock split.



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  • CreatedAugust 19, 2014
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