Effect of stock dividends, stock splits, and treasury stock transactions [10-15 min]
Many types of transactions may affect stockholders’ equity.
Requirement
1. Identify the effects of the following transactions on total stockholders’ equity.Each transaction is independent.
a. A 10% stock dividend. Before the dividend, 520,000 shares of $1 parcommon stock were outstanding; market value was $3 at the time of the dividend.
b. A 2-for-1 stock split. Prior to the split, 65,000 shares of $4 par common stockwere outstanding.
c. Purchase of 1,000 shares of treasury stock (par value at $0.50) at $3 per share.
d. Sale of 900 shares of $0.50 par treasury stock for $5 per share. Cost of thetreasury stock was $3 per share.
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