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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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Stock Dividends and Stock Splits

The balance sheet of Castle Corporation includes the following stockholders’ equity section:

Chapter 10, Problem 72E, Stock Dividends and Stock Splits The balance sheet of Castle Corporation includes the following

Required:

  1. Assume that Castle issued 60,000 shares for cash at the inception of the corporation and that no new shares have been issued since. Determine how much cash was received for the shares issued at inception.
  2. Assume that Castle issued 30,000 shares for cash at the inception of the corporation and subsequently declared a 2-for-l stock split. Determine how much cash was received for the shares issued at inception.
  3. Assume that Castle issued 57,000 shares for cash at the inception of the corporation and that the remaining 3,000 shares were issued as the result of stock dividends when the stock was selling for $53 per share. Determine how much cash was received for the shares issued at inception.

To determine

(a)

Introduction:

Common stock is issued by the company to raise finance using equity. It isissued to the investors (who are regarded as stockholders or shareholders, once common stock are issued to them) with no obligation to pay dividend periodically. Common stock is also referred to as common shares.

To calculate:

Cash received on issue of shares.

Explanation

Given:

The following equity statement:

Particulars $
Common stock, $2 par, 80,000 shares authorized, 60,000 issued and outstanding 120,000
(+) Additional Paid-in capital − common stock 371,800
Total Capital Stock 491,800
Retained Earnings 173,000
Total Stockholders’ equity 664,800

At the time of inception:

No. of shares issued = 60,000

Par value = $2

Total Par Value of shares issued = No

To determine

(b)

Introduction:

A common stock is issued by the company to raise finance using equity. It is issued to the investors (who are regarded as stockholders or shareholders, once common stock is issued to them) with no obligation to pay dividend periodically. Common stock is also referred to as common shares.

To calculate:

Cash received on issue of shares and split stock.

To determine

(c)

Introduction:

A common stock is issued by the company to raise finance using equity. It is issued to the investors (who are regarded as stockholders or shareholders, once common stock is issued to them) with no obligation to pay dividend periodically. Common stock is also referred to as common shares.

To calculate:

Cash received on issues of shares and stock dividend thereof.

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