Question

The stockholders’ equity section of Villa Corporation’s balance sheet as of December 31, 2013, follows.
Contributed capital:
Common stock, $4 par value, 500,000 shares authorized, 200,000
shares issued and outstanding ................ $ 800,000
Additional paid-in capital ................. 1,000,000
Total contributed capital .................. $1,800,000
Retained earnings .................... 1,200,000
Total stockholders’ equity .................. $3,000,000
Villa had the following transactions in 2014:
Feb. 28 The board of directors declared a 10 percent stock dividend to stockholders of record on March 25 to be distributed on April 5. The market value on this date is $16.
Mar. 25 Date of record for stock dividend.
Apr. 5 Issued stock dividend.
Aug. 3 Declared a 2-for-1 stock split.
Nov. 20 Purchased 18,000 shares of the company’s common stock at $8 per share for the treasury.
Dec. 31 Declared a 5 percent stock dividend to stockholders of record on January 25 to be distributed on February 5. The market value per share was $9.

Required
1. Record the stockholders’ equity components of these transactions using T accounts.
2. Prepare the stockholders’ equity section of Villa’s balance sheet as of December 31, 2014. Assume net income for 2014 is $108,000.
3. If you owned 1,000 shares of Villa stock on February 1, 2014, how many shares would you own on February 5, 2015? Would your proportionate share of the ownership of the company be different on the latter date from what it was on the former date? Explain your answer.



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  • CreatedMarch 26, 2014
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