Question

indicate the effects on stockholders's equilty componets?

During 2008, Jester Corporation had the following transactions and events.
1. Declared a cash dividend.
2. Issued par value common stock for cash below par value.
3. Completed a 2-for-1 stock split in which $10 par value stock was changed to $5 par value
stock.
4. Declared a small stock dividend when the market value was higher than par value.
5. Made a prior period adjustment for understatement of net income.
6. Issued the shares of common stock required by the stock dividend declaration in item no.
4 above.
7. Paid the cash dividend in item no. 1 above.
8. Issued par value common stock for cash above par value.
Instructions
Indicate the effect(s) of each of the foregoing items on the subdivisions of stockholders’ equity.
Present your answer in tabular form with the following columns. Use (I) for increase, (D) for decrease,
and (NE) for no effect. Item no. 1 is given as an example.

3 years ago - 1 answers

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Indicate the effects on stockholders's equilty componets?
During 2008, Jester Corporation had the following transactions and events.
1. Declared a cash dividend.
Decrease
Equity is decreased as soon as the dividend is declared.
2. Issued par value common stock for cash below par value.
Increase
Even though the increase is less than if it had been issued at par or abover par, it will still increase equity.
3. Completed a 2-for-1 stock split in which $10 par value stock was changed to $5 par value
stock.
No effect
There will be more shares, but the overall value remains the same.
4. Declared a small stock dividend when the market value was higher than par value.
No effect
Paid-In-Capital and Retained Earnings are respectively increased and decreased by the same amount.
5. Made a prior period adjustment for understatement of net income.
Increase
If net income increases, equity increases.
6. Issued the shares of common stock required by the stock dividend declaration in item no.
4 above.
No effect
There is still no effect.
7. Paid the cash dividend in item no. 1 above.
No effect
Equity is decreased when the dividend is declared.
8. Issued par value common stock for cash above par value.
Increase
Whenever stock is issued, whether at discount, par, or premium, equity will always increase.

3 years ago