Answer:
dividend stock amount $671,000
No changes in the accounting equation. Only the composition of the Equity is changed
Cash flow: Financial Activity
Explanation:
30,500 shares x $22 each = 671,000
common stock 30,500 x $7 = 213,500
additional paid-in 457,500
Assets = Liabilities + Equity
Assets = Liabilities + Common Stock + Additional Paid-in + Retained Earnings
0 = 0 + 213,500 + 457,500 - 617,000
In the end the total amount for assets, liaibity and equity do not change.
Cash flow: it is a financing activity as the company gives this dividedsn in return of the initial investment made by the shareholders
Answer:
A) Compute the amount of the stock dividend.
stock dividend = 30,500 shares x 4% x $22 market value = $26,840 (corresponds to 1,220 shares)
B) Show the effects of the stock dividend on the financial statements using a horizontal statements model.
balance sheet:
assets = liabilities + equity
N/A N/A + common stocks + APIC - retained earnings
$8,540 + $18,300 - $26,840
income statement:
revenue - costs = income
N/A N/A N/A
cash flow:
amount activity
N/A FA (financing activity)
Explanation:
In the balance sheet, neither assets nor liabilities are affected, and shareholders' equity is rearranged: retained earnings decreases (dividends are paid using retained earnings) while common stock and additional paid in capital increase by the amounts equivalent to 1,220 new stocks issued.
Both the income statement and cash flow statement are not affected in any way, but the noncash transaction must be reported as a financing activity, with no cash flow is associated to it.
