Question

Saved Help Save & Exit Sub Exercise 8-15 Accounting for stock dividends LO 8-7 Check my wo Beacon Corporation issued a 7 percent stock dividend on 39,000 shares of its $8 par common stock. At the time of the dividend, the market value of the stock was $30 per share. Required: a. Compute the amount of the stock dividend. b. Show the effects of the stock dividend on the financial statements using a horizontal statements model like the following one. In the Cash Flow column, indicate whether the item is an operating activity (OA), investing activity (IA), or financing activity (FA). If an element was not affected by the event, leave the cell blank. Complete this question by entering your answers in the tabs below. Required A Required B Compute the amount of the stock dividend. Stock dividend < Prev 6 of 7 !!! Next > _02 e WI PHILIPS

Answer 1

Answer to Requirement a:

Number of shares issued as dividend = 7% * Number of shares outstanding
Number of shares issued as dividend = 7% * 39,000
Number of shares issued as dividend = 2,730

Stock dividend = Number of shares issued as dividend * Market price per share
Stock dividend = 2,730 * $30.00
Stock dividend = $81,900

Answer to Requirement b:

Decrease in retained earnings = Number of shares issued as dividend * Market price per share
Decrease in retained earnings = 2,730 * $30.00
Decrease in retained earnings = $81,900

Increase in common stock = Number of shares issued as dividend * Par value per share
Increase in common stock = 2,730 * $8.00
Increase in common stock = $21,840

Increase in paid-in capital in excess = Decrease in retained earnings - Increase in common stock
Increase in paid-in capital in excess = $81,900 - $21,840
Increase in paid-in capital in excess = $60,060

Income Statement Assets = | Liabilities + BEACON CORPORATION Horizontal Statements Model Balance Sheet Stockholders' Equity Common Revenue + PIC in Excess + Stock Earnings 21840 + 60060 + -81900 Statement of Cash Flows Expense = Net Income Cash