HW5 - P10-3B The Athletic Village has done very well the...

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P10-3B The Athletic Village has done very well the past year, and its stock price is now trading at $82 per share. Management is considering either a 100% stock dividend or a 2- for-1 stock split. Required: Complete the following chart comparing the effects of a 100% stock dividend versus a 2- for-1 stock split on the stockholders' equity accounts, shares outstanding, par value, and share price. Solution Before After 100% Stock Dividend After 2-for-1 Stock Split Common stock, par value $ 10 $ 20 $ 10 Additional paid-in capital 24,990 24,990 24,990 Total paid-in capital 25,000 25,010 25,000 Retained Earnings 15,000 14,990 15,000 Total stockholders’ equity $40,000 $40,000 $40,000 Shares outstanding 1,000 2,000 2,000 Par value per share $0.01 $0.01 $0.005 Share price $82 $41 $41
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P10-6B National League Gear has two classes of stock authorized: 6%, $20 par preferred, and $5 par value common. The following transactions affect stockholders' equity during 2012, National League's first year of operations: February 2 Issue 1 million shares of common stock for $25 per share. February 4 Issue 500,000 shares of preferred stock for $22 per share. June 15 Repurchase 100,000 shares of its own common stock for $20 per share. August 15 Reissue 75,000 shares of treasury stock for $35 per share. November 1 Declare a cash dividend on its common stock of $1 per share and a $600,000 (6% of par value) cash dividend on its preferred stock payable to all stockholders on record on November 15. ( Hint: Dividends are not paid on treasury stock.) November 30 Pay the dividends declared on November 1. 1. Record each of these transactions Solution: February 2, 2012 Debit Credit Cash (1,000,000 x $25) 25,000,000 Common Stock (1,000,000 x $5) 5,000,000 Additional Paid-in Capital (difference) 20,000,000 (Issue common stock above par) February 4, 2012 Cash (500,000 x $22) 11,000,000 Preferred Stock (500,000 x $20) 10,000,000 Additional Paid-in Capital (difference) 1,000,000 (Issue preferred stock above par) June 15, 2012 Treasury Stock (100,000 shares x $20)
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This note was uploaded on 02/23/2012 for the course MGMT 200 taught by Professor Greigg during the Summer '08 term at Purdue.

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HW5 - P10-3B The Athletic Village has done very well the...

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