Dividends and Stock Splits On January 1, 2010, Svenberg Inc.s Stockholders Equity category appeared as follows: Preferred


Dividends and Stock Splits On January 1, 2010, Svenberg Inc.’s Stockholders’ Equity category appeared as follows:
Preferred stock, $80 par value, 8%,
1,000 shares issued and outstanding ....... $ 80,000
Common stock, $10 par value,
10,000 shares issued and outstanding ....... 100,000
Additional paid-in capital—Preferred ...... 60,000
Additional paid-in capital—Common ....... 225,000
Total contributed capital ............. $ 465,000
Retained earnings ..............1,980,000
Total stockholders’ equity ...........$ 2,445,000
The preferred stock is noncumulative and nonparticipating. During 2010, the following transactions occurred:
a. On March 1, declared a cash dividend of $6,400 on preferred stock. Paid the dividend on April 1.
b. On June 1, declared an 8% stock dividend on common stock. The current market price of the common stock was $26. The stock was issued on July 1.
c. On September 1, declared a cash dividend of $0.70 per share on the common stock; paid the dividend on October 1.
d. On December 1, issued a 3-for-1 stock split of common stock, when the stock was selling for $30 per share.

1. Explain each transaction’s effect on the stockholders’ equity accounts and the total stockholders’ equity.
2. Develop the Stockholders’ Equity category of the balance sheet. Assume that the net income for the year was $720,000.
3. Write a paragraph that explains the difference between a stock dividend and a stock split.

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...
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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