SCh11

Fundamentals of Financial Accounting with Annual Report

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Student Name: Instructor Class: McGraw-Hill/Irwin Coached Problem 11-4 WATER TOWER COMPANY Stock Dividends Preferred Common (6,000 (30,000 shares) shares) Total Case A--Preferred is noncumulative: Preferred $4,200 $4,200 Balance to common $25,800 $25,800 $4,200 $25,800 $30,000 Per share $0.70 $0.86 Case B--Preferred is cumulative: Preferred: Arrears $8,400 $8,400 Current year $4,200 $- $4,200 Balance to common $- $- $- $12,600 $- $12,600 Per share $2.10 $- Case C--Preferred is cumulative: Preferred: Arrears $8,400 $8,400 Current year $4,200 $4,200 Balance to common $53,400 $53,400 $12,600 $53,400 $66,000 Per share $2.10 $1.78
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WATER TOWER COMPANY Schedule of Comparative Differences (with comments) Amount of Dollar Increase (Decrease) Item Cash Dividend - Case C Stock Dividend Assets $66,000 decrease No assets were disbursed Liabilities Current liabilities increased No effect - no contractual $66,000 on declaration date and liability was created. decreased $66,000 on payment date. The net effect is zero. Stockholders' equity $66,000 decrease (debit to No effect on total stockholders'
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