Balthus Corp. reports the following components of stockholders’ equity on December 31, 2016:
Common stock—\(1 par value, 320,000 shares authorized,
200,000 shares issued and outstanding . .. . . . . . . . . . . . . . . . . . . . \) 200,000
Paid-in capital in excess of par value, common stock . . . . . . . . . . . . . . . . 1,400,000
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . 2,160,000
Total stockholders’ equity . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . \(3,760,000
It completed the following transactions related to stockholders’ equity in year 2017:
Jan. 10 Purchased 40,000 shares of its own stock at \)12 cash per share.
Mar. 2 Directors declared a \(1.50 per share cash dividend payable on March 31 to the March 15 stockholders of record.
Mar. 31 Paid the dividend declared on March 2.
Nov. 11 Sold 24,000 of its treasury shares at \)13 cash per share.
Nov. 25 Sold 16,000 of its treasury shares at \(9.50 cash per share.
Dec. 1 Directors declared a \)2.50 per share cash dividend payable on January 2 to the December 10 stockholders of record.
Dec. 31 Closed the $1,072,000 credit balance (from net income) in the Income Summary account to Retained Earnings.
Required
1. Prepare journal entries to record each of these transactions for 2017.
2. Prepare a statement of retained earnings for the year ended December 31, 2017.
3. Prepare the stockholders’ equity section of the company’s balance sheet as of December 31, 2017.
Use the data in Exercise 11-8 to determine the number of dividends paid each year to each of the two classes of stockholders assuming that the preferred stock is cumulative. Also, determine the total dividends paid to each class for the four years combined.
On June 30, 2017, Sharper Corporation’s common stock is priced at \(62 per share before any stock dividend or split, and the stockholders’ equity section of its balance sheet appears as follows.
Common stock—\)10 par value, 120,000 shares
authorized, 50,000 shares issued and outstanding . . . . . . . . . . . . . \( 500,000
Paid-in capital in excess of par value, common stock . . . . . . . . . . . . . . 200,000
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 660,000
Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . \)1,360,000
1. Assume that the company declares and immediately distributes a 50% stock dividend. This event is recorded by capitalizing retained earnings equal to the stock’s par value. Answer these questions about stockholders’ equity as it exists after issuing the new shares.
a. What is the retained earnings balance?
b. What is the amount of total stockholders’ equity?
c. How many shares are outstanding?
2. Assume that the company implements a 3-for-2 stock split instead of the stock dividend in part 1.
Answer these questions about stockholders’ equity as it exists after issuing the new shares.
a. What is the retained earnings balance?
b. What is the amount of total stockholders’ equity?
c. How many shares are outstanding?
3. Explain the difference, if any, to a stockholder from receiving new shares distributed under a large stock dividend versus a stock split.
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