|. Satisfy expectations of stockholders without spending cash.
2. Increase marketability of stock by increasing the number of shares
outstanding and thereby decreasing the market price per share.
3, Emphasize the permanent reinvestment of stockholders’ equity
that is unavailable for dividends.
BOARD OF DIRECTORS
+
SUMMARY OF STOCK DIVIDEND ENTRIES.
Declaration
Date
Retained Earnings 200
‘Common Stock Dividends Distributable
Paid-in Capital in Excess of Par
00
300K
Issuance Date
‘Common Stock Dividends Distributable... xxx
‘Common Stock.
OK
Small stock dividends | Retained earnings reduced by
F.M.V. of stock.
Large stock dividends | Retained earnings reduced by par
value of stock.
STOCKHOLDERSatockholders Equity Before a 10% stock Dividend
Stockholders’ Equity
Paid-in capital
‘Common stock, $10 par value, 100,000 shares
issued and outstanding $1,000,000
Additional paid-in capital in excess of par value 200,000
Total paid-in capital 1,200,000
Retained earnings 300,000
Total stockholders’ equity $1,500,000
(Market Value = $15)
Board of Directors Declares and Distributes a 10% Stock Dividend
Entries:
Retained Earnings 150,000
‘Common Stock Dividends Distributable 100,000
Paid-in Capital in Excess of Par Value 50,000
‘Common Stock Dividends Distributable 100,000
‘Common Stock 100,000
Stockholders! Equity After a 10% Stock Dividend
Stockholders’ Equity
Paid-in capital
‘Common stock, $10 par value, 110,000 shares
issued and outstanding $1,100,000
‘Additional paid-in capital in excess of par value 250,000
Total paid-in capital 1,350,000
Retained earnings 150,000For the Year Ended December 31, 2002
Sales $800,000
Cost of Goods Sold 550,000,
Gross Proft 250.000,
Operating Expenses 50,000
‘Operating income 2eaan0
Other Revenues and Gains 150%
Other Expenses and Losses 25,000
ete fom income before Income Taxes 130,000
my income Taxee $7,000.
Garcon Income from Continuing Operations 133,000
Discontinued Operations:
Net of $12,000 Tax Savings $(28,000)
Loss from Operations of Video Division,
Loss on Disposal of Video Division,
‘Net of $27,000 Tax Savings (63,000) (91,000)
Income before Extraordinary Item
‘and Cumulative Effect of
‘Change in Accounting Principle 42,000
Extraordinary item:
Gain from Expropriation of Investment,
[Net of $15,000 Income Taxes 35,000
‘Cumulative Effect of Change in Accounting
Principle:
Effect on Prior Years of Change in
reciation Method, Net of $9,000
income Tax Savings 21,000)
Net Income 56,000
Earnings Per Share (20,000 Shares)
Income from Continuing Operations $6.65
Loss from Discontinued Operations, Net of Tax (1-40)
Loss on Disposal of Discontinued Operations, Net of Tax ais
Income before Extraordinary Item and Cumulative Effect. §—§ ——'
ee 2.10
Extraordinary Gain, Net of Tax 175
‘Cumulative Effect of Change in Accounting Principle,