Stevenson Enterprises is considering the following items: 1. The company may declare a 10 percent stock dividend,

Question:

Stevenson Enterprises is considering the following items:

1. The company may declare a 10 percent stock dividend, issuing an additional share of common stock for every ten shares outstanding; the common stock is currently selling for $25 per share.

2. The company may issue a 2:1 stock split.

Prior to these events, Stevenson Enterprises reports the following;

Common stock ($6 par value, 650,000 shares authorized, 70,000

Issued, 60,000 outstanding and 10,000 held) …………. $420,000

Additional paid-in capital (C/S) ……………………………. 525,000

Retained earnings …………………………………………... 695,000

Less: Treasury stock ……………………………………… (100,000)

Total shareholders’ equity ………………………………. $1,540,000

Required

(a) Assume that Stevenson Enterprises declares the stock dividends but not the stock split. Prepare the necessary journal entry. Prepare the shareholders’ equity section of the balance sheet to reflect the stock dividend.

(b) Assume that Stevenson Enterprises declares the stock split but not the stock dividend. Prepare the shareholders’ equity section of the balance sheet to reflect the stock split.

(c) Assume that Stevenson Enterprises declares the stock dividend and then the stock split. Prepare the necessary journal entries. Prepare the shareholders’ equity section of the balance sheet to reflect both actions

(d) Assume that Stevenson Enterprises declares the stock split and then the stock dividend. Prepare the necessary journal entries. Prepare the shareholders’ equity section of the balance sheet to reflect both actions. Assume that the market prices of Stevenson’s stock drops to $12.50 per share following the 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... 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... 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...