Problem

Preparing a Statement of Stockholders’ EquityA summary of the transactions affecting the s...

Preparing a Statement of Stockholders’ Equity

A summary of the transactions affecting the stockholders’ equity of Riverton Corporation during the current year follows:

Prior period adjustment (net of income tax benefit)

$ (160,000)

Issuance of common stock: 10,000 shares of $10 par value capital stock at $68 per share

680,000

Declaration and distribution of 5% stock dividend (11,500 shares, market price $40 per share)

(460,000)

Purchased 1,000 shares of treasury stock at $70

(70,000)

Reissued 500 shares of treasury stock at a price of $72 per share

36,000

Net income

1,690,000

Cash dividends declared

(285,400)

Instructions

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

 

Capital Stock ($10 par value)

Additional Paid-in Capital

Retained Earnings

Treasury Stock

Total Stock-holders’ Equity

Balances, Jan. 1

$2,200,000

$3,530,000

$1,900,000

$-0-

$7,630,000


b. What was the overall effect on total stockholders’ equity of the 5 percent stock dividend of 11,500 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 why not?

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