The following is a summary of the transactions affecting the stockholders equity of Dry Wall, Inc., during

The following is a summary of the transactions affecting the stockholders’ equity of Dry Wall, Inc., during the current year:

Prior period adjustment (net of income tax benefit) . . . . . . . . . . . . . . . . . . . . . . . $ (47,000)

Issuance of common stock: 20,000 shares of $1 par value

capital stock at $15 per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 300,000

Declaration and distribution of 10% stock dividend (15,000 shares,

market price $17 per share) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 255,000*

Purchased 3,000 shares of treasury stock at $16 . . . . . . . . . . . . . . . . . . . . . . . . (48,000)

Reissued 1,000 shares of treasury stock at a price of $18 per share . . . . . . . . . 18,000

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,200,000

Cash dividends declared ($1 per share) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (163,000)

Instructions

a. Prepare a statement of stockholders’ equity for the year. Use the column headings and beginning balances shown below. (Notice that all additional paid-in capital accounts are combined into a single column.)

b. What was the overall effect on total stockholders’ equity of the 10 percent stock dividend of 15,000 shares? What was the overall effect on total stockholders’ equity of the cash dividends declared? Do these two events have the same impact on stockholders’ equity? Why or whynot?

Transcribed Image Text:

Additional Paid-in Total Capital Stock ($1 par value Cap Earnings Stock Retained Treasury Stockholders' Equity Balances, Jan. 1 $130,000 $1,170,000 $1,400,000 0 $2,700,000