The stockholders equity for Dairy King Drive-Ins (DK) on April 16, 2015, follows: Stockholders Equity Common stock

Question:

The stockholders’ equity for Dairy King Drive-Ins (DK) on April 16, 2015, follows:
Stockholders’ Equity
Common stock, $0.30 par, 2,600,000 shares
authorized, 750,000 shares issued ....... $ 225,000
Paid-in capital in excess of par—common ....... 1,614,400
Retained earnings ................... 7,154,000
Accumulated other comprehensive income (loss) .. (200,000)
Total stockholders’ equity .............$ 8,793,400
On April 16, 2015, the market price of DK common stock was $20 per share. Assume DK declared and distributed a 15% stock dividend on this date.

Requirements
1. Journalize the declaration and distribution of the stock dividend.
2.
Prepare the stockholders’ equity section of the balance sheet after the stock dividend.
3.
Why is total stockholders’ equity unchanged by the stock dividend?
4.
Suppose DK had a cash balance of $610,000 on April 17, 2015. What is the maximum amount of cash dividends DK can declare?

Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on...
Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...
Distribution
The word "distribution" has several meanings in the financial world, most of them pertaining to the payment of assets from a fund, account, or individual security to an investor or beneficiary. Retirement account distributions are among the most...
Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...
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Financial Accounting

ISBN: 978-0133427530

10th edition

Authors: Walter Harrison, Charles Horngren, William Thomas

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