Question

Problem 2-Stockholders' Equity The following transactions occurred during the year for Creamy Chocolates Company. The Company is authorized to issue 100,000 shares of common stock with a par value of $0.10 per share. During 2018, it incurred an operating loss of $2,814 million 1. 2. On July 15, 2018, the Company declared and paid a cash dividend to its common shareholders 3. On September 1, 2018, the Company declared a 15% stock dividend On October 1, 2018, the Company executed a 1-for-2 reverse stock split to raise its common share price 4. 5. On December 17, 2018, the Company repurchased 100,000 shares of common stock Identify whether each transaction will increase, decrease, or have no effect on total shareholders' equity. Identify which shareholders' equity accounts will be affected by each transaction and indicate whether each account will increase, decrease, or remain unchanged. (1 point each)

Answer 1

11 1. Incurred an operating loss of $2,814 million 12 2. Declared and paid the regular dividend to its common shareholders 13 3. declaration of stock dividend 14 4. Executed a 1-for-2 reverse stock split to raise its common share price 15 5. Repurchased shares of Common stock 16 17 18 Decrease Decrease Have no effect Have no effect Decrease Retained Earnings Retained Earnings Retained Earnings, Common Stock Number of shares decrease ,per share increase Number of shares decreased