Question

Identifying and Analyzing Financial Statement Effects of Dividends
The stockholders' equity of Kinney Company at December 31, 2011, is shown below.

5% preferred stock, $100 par value, 12,000 shares authorized; 5,000 shares issued and outstanding	$ 500,000
Common stock, $5 par value, 400,000 shares authorized; 100,000 shares issued and outstanding	500,000
Paid-in capital in excess of par value—preferred stock	40,000
Paid-in capital in excess of par value—common stock	600,000
Retained earnings	656,000
Total stockholders' equity	$2,296,000

The following transactions, among others, occurred during 2012:
Apr. 1 Declared and issued a 100% stock dividend on all outstanding shares of common stock. The market value of the stock was $11 per share.
Dec. 7 Declared and issued a 3% stock dividend on all outstanding shares of common stock. The market value of the stock was $14 per share.
Dec. 20 Declared and paid (1) the annual cash dividend on the preferred stock and (2) a cash dividend of 80 cents per common share.

(a) Use the financial statement effects template to indicate the effects of these separate transactions.

Use negative signs with your answers, when appropriate.

	Balance Sheet
Transaction	Cash Asset	+	Noncash Assets	=	Liabilities	+	Contributed Capital	+	Earned Capital
Apr. 1
Dec. 7
Dec. 20

Income Statement
Revenue	-	Expenses	=	Net Income

(b) Compute retained earnings for 2012 assuming that the company reports 2012 net income of $253,000.
$

Answer 1

= 65 600D + 253000-584000-189800 Solution Ta) Balance sheet Transaction; cash Assetst Non cash liabilitiest contribute of Earned Assets Capital 1-Apr O S00000 capital 0. 0 sooo 7 Dec o 84000 ||-$84000 20 Dec - $189800 O 0 0 $189800 Notes on (ash dividend on preferred stock = 500000X 5 = 25000 Casti dividend on compron stock = 206000x0.8 164 800 total cash dividend 25ood + 164 800 =189800 ) Retained earnings for adia = opening detained earning ther Bucome - Stock dividend distribute 121 - cash dividend distributed PS Fres $ $135200 C