Date debit credit 7 on october 31 the stockholders

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DateDebitCredit7.On October 31 the stockholders' equity section of Eaton Company's balance sheet consists of commonstock $600,000 and retained earnings $400,000. Eaton is considering the following two courses of action:(1) declaring a 10% stock dividend on the 60,000 $10 par value shares outstanding or(2) a2-for-1 stock split. The current market price is $15 per share.
InstructionsPrepare a tabular summary of the effects of the alternative actions on the company's stockholders'equity and outstanding shares. Use these column headings:Before Action, After Stock Dividend, andAfter Stock
Chapter 11 SolutionsMultiple Choice Solutions1.C2.B3.C4.C
5.B6.A7.B8.A9.A10.A11.C12.C13.D14.C15.BExercise Solutions1.1.A5.D2.D6.A and D3.A7.A4.N8.A2.DateDebitCreditCashJan. 1120,000Common Stock(16,000 shares × $2 par per share)32,000Paid-in Capital in Excess of Par Value—Common Stock88,000Treasury StockMar. 130,000Cash30,000Chapter 11 Solutions (Cont.)Exercise Solutions (Cont.)3.(a)DateDebitCreditCash(8,000 shares × $24 market price per share)Feb. 1192,000Preferred Stock(8,000 shares × $10 par value per share)80,000
Paid-in Capital in Excess of Par Value—PreferredStock112,000Cash(6,000 shares × $25 market price per share)Jul. 1192,000Preferred Stock(6,000 shares × $10 par value per share)60,000Paid-in Capital in Excess of Par Value—PreferredStock90,000(b)(1)Preferred stock—$80,000 + $60,000 =$140,000.(2)Paid-in Capital in Excess of Par Value—Preferred Stock—$112,000 + $90,000 =$202,000.4.Paid-in CapitalRetainedAccountCapital StockAdditionalEarningsOtherPreferred StockPaid-in Capital in Excess ofXPar Value—Preferred StockXCommon StockPaid-in Capital in Excess ofXStated Value—Common StockXRetained EarningsXTreasury Stock—CommonXChapter 11 Solutions (Cont.)Exercise Solutions (Cont.)5.(a)4,000,000 shares were authorized.(b)2,080,000 shares were issued.(c)2,000,000 shares are outstanding(2,080,000 issued less 80,000 in treasury).(d)The balance of the Common Stock account is$2,080,000; ($1 × 2,080,000 shares = $2,080,000). (sh.iss. × par val./sh.)(e)The balance of the Treasury Stock account is$2,000,000; ($25 × 80,000 shares = $2,000,000). (Trea.sh. × cost/sh.)6.DateDebitCreditCashMar. 1675,000Common Stock(90,000 shares × $1 par value per share)90,000
Paid-in Capital in Excess of Par Value—Common Stock585,000Cash DividendsJun. 1330,000Dividends Payable(165,000 shares × $2 = $330,000)330,000*(75,000 shares + 90,000 shares issued =165,000 shares)Dividends PayableJun. 30330,000Cash330,000Treasury Stock(5,000 shares × $18 per share)Dec. 190,000Cash90,000Cash Dividends(160,000 shares × $2.50)Dec. 15400,000Dividends Payable400,000*(165,000 shares- 5,000 shares bought back =160,000 shares)7.AfterAfterBeforeStockStockActionDividendSplitStockholders' equityPaid-in capitalCommon stock$600,000$660,000$600,000In excess of par value030,0000Total paid-in capital600,000690,000600,000Retained earnings400,000310,000400,000Total stockholders'equity$1,000,000$1,000,000$1,000,000Outstanding shares60,00066,000120,000Par value per share$10.00$10.00$5.00Stock DividendTotal common stock increase= (60,000 shares x 10% stock dividend x $10 par value per share)Total paid-in capital in excess of par increase= [60,000 shares x 10% stock dividend x ($15-$10)]Total paid-in capital increase= (60,000 shares x 10% stock dividend x $15 market price per share)Total retained earnings decrease= (60,000 shares x 10% stock dividend x $15 market price per share)New Number of Shares= 60,000 shares X 1.10 =66,000 shares
Stock SplitNew Number of Shares= 60,000 shares X 2 =120,000 sharesNew par value= $10 par ÷ 2 =$5 par value
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