ch15 - shares $22)/(500 + 150) shares]. E 15-12 Preparation...

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Chapter 15 Financing with Equity E 15-9 Stock Dividends 1. Retained earnings—decrease 300,000 shares × 0.10 × $40 = $1,200,000 Common stock, par—increase 300,000 shares × 0.10 × $10 per share = $300,000 Paid-in capital in excess of par $1,200,000 – $300,000 = $900,000 2. The stock dividend has no effect on the total cost of the stock and is not taxable income when additional shares are received. The cost basis per share, however, is to be adjusted, and because the number of shares owned has increased by 10% (50 shares), the cost basis per share after the stock dividend will become $20 [(500 shares × $22)/(500 + 50) shares]. 3. Retained earnings—decrease 300,000 shares × 0.30 × $10 par value = $900,000 Common stock, par—increase 300,000 shares × 0.30 × $10 per share = $900,000 As before, the stock dividend does not affect the total cost of the investment. However, the cost basis per share after the 30% stock dividend is $16.92 [(500
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Unformatted text preview: shares $22)/(500 + 150) shares]. E 15-12 Preparation of the Stockholders Equity Section Keetch Corporation Partial Balance Sheet December 31, 2006 Stockholders equity Preferred stock, 4% cumulative, $80 par value, 75,000 shares authorized, 15,000 shares issued and outstanding $1,200,000 Common stock, $2 par value, 150,000 shares authorized, 35,000 shares issued and outstanding 70,000 Paid-in capital in excess of par (35,000 shares [$34 $2]) 1,120,000 Retained earnings 163,000* Total stockholders equity $2,553,000 *Retained earnings BalanceBeginning (2005) $ Add: Net income2005 50,000 BalanceDecember 31, 2005 $ 50,000 Add: Net income2006 175,000 Subtotal $ 225,000 Deduct: Dividends Preferred (15,000 shares at $80 par 0.04 = $48,000) $48,000 Common 14,000 62,000 BalanceDecember 31, 2006 $ 163,000...
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ch15 - shares $22)/(500 + 150) shares]. E 15-12 Preparation...

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