Question

Highlander's performance P1 Com Problems: Set B 14-1B The condensed balance sheet of Erickson Corporation reports the following Compare impact of cash dividend, stock dividend, and stock split. (LOL) AP Contributed Retained ear: During the year, the foll 1. Reacquired 600 shares at 2. Issued 3,600 shares at $4 3. Issued 1,000 shares at $6 ERICKSON CORPORATION Balance Sheet (partial) January 31, 2017 $9,000,000 $2,500,000 Total assets Liabilities and shareholders' equity Liabilities Shareholders' equity Common shares, unlimited number authorized, 500,000 issued Retained earnings Total liabilities and shareholders' equity $3,000,000 3,500,000 Instructions (a) Calculate the number (b) Determine the ending Reacquisition of Com TAKING IT FURTHER to fulfill employee stock with shares instead of cas 6,500,000 $9,000,000 The market price of the common shares is currently $30 per share. Erickson wants to assess the impact of three possible alternatives on the corporation and its shareholders. The alternatives are: 1. Payment of a $1.50 per share cash dividend 2. Distribution of a 5% stock dividend 3. A 2-for-1 stock split P14-4B The following Common shares Preferred shares Contributed sur Retained earning Instructions (a) For each alternative, determine the impact on assets, (2) liabilities, (3) common shares. (4) retained earnings, (5) total shareholders' equity, and (6) the number of shares. Assume an Erickson shareholder currently owns 2,000 common shares at a er currently owns 2,000 common shares at a cost of $50,000. What is the impact of each alternative for the shareholder, assuming that the market price of the reholder, assuming that the market price of the shares changes proportionately with the alternative? That is the purpose of a reverse stock sp TAKING IT FURTHER What is the purpose of a reverse stock split? When mi when might a company take this action? The following selected to Jan. 17 Issued 50,00 Feb. 27 Reacquired Apr. 14 Split the cor June 25 Reacquired Aug. 16 Reacquired Oct. 17 Declared a November Dec. 3 Distributed shares was d the following shareholders' equity accounts and nast transactions P14-2BOn December 31, 2016, Asaad Corporation had the following shareholder

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Answer 1

Determine the effect of each of the alternatives as follows:

	A	B	C	D	E
1		Original Balances	After $1.50 per share cash dividend	If 5% stock dividend paid	If 2-for-1 stock-split
2	Total assets	9000000	8250000	9000000	9000000
3	Liabilities and shareholders' equity
4	Liabilities	2500000	2500000	2500000	2500000
5	Shareholders' equity
6	Common shares	3000000	3000000	3750000	3000000
7	Retained earnings	3500000	2750000	2750000	3500000
8	Total shareholders' equity	6500000	5750000	6500000	6500000
9
10	Number of shares outstanding	500000	500000	525000	1000000

Above figures have been calculated in the following manner:

	Original Balances	After $1.50 per share cash dividend	If 5% stock dividend paid	If 2-for-1 stock-split
Total assets	9000000	=B2-(500000*1.5)	=B2	=B2
Liabilities and shareholders' equity
Liabilities	2500000	=B4	=B4	=B4
Shareholders' equity
Common shares	3000000	=B6	=B6+(500000*5%*30)	=B6
Retained earnings	3500000	=B7-(500000*1.5)	=B7-(500000*5%*30)	=B7
Total shareholders' equity	=B6+B7	=C6+C7	=D6+D7	=E6+E7
Number of shares outstanding	500000	=B10	=500000+(500000*5%)	=B10*2