Cash Dividends, Stock Dividends, and Stock Splits
HiTech Manufacturing Company has 1,000,000 shares of $1 par value capital stock outstanding on January 1. The following equity transactions occurred during the current year:
Apr. 30 | Distributed additional shares of capital stock in a 2-for-1 stock split. Market price of stock was $35 per share. |
June 1 | Declared a cash dividend of $0.60 per share. |
July 1 | Paid the $0.60 cash dividend to stockholders. |
Aug. 1 | Declared a 5 percent stock dividend. Market price of stock was $19 per share. |
Sept. 10 | Issued shares resulting from the 5 percent stock dividend declared on August 1. |
a. Prepare journal entries to record the above transactions.
b. Compute the number of shares of capital stock outstanding at year-end.
c. What is the par value per share of HiTech Manufacturing stock at the end of the year?
d. Determine the effect of each of the following on total stockholders’ equity: stock split, declaration and payment of a cash dividend, declaration and distribution of a stock dividend. (Your answers should be either increase, decrease, or no effect.)
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