Purchase Solution

# Capital section of the balance sheet

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Sun Energy Company has the following capital section in its balance sheet. Its stock is currently selling for \$5 per share.

Common stock (100,000 shares at \$1 par) = \$100,000
Capital in excess of par - 100,000
Retained earnings = 200,000
TOTAL = \$400,000

The firm intends to first declare a 10 percent stock dividend and then pay a 30-cent cash dividend (which also causes a reduction of retained earnings).

PROVIDE THIS SOLUTION:
Show the capital section of the balance sheet after the first transaction and then after the second transaction.

##### Solution Summary

The solution explains how to prepare the capital section of the balance sheet after a stock dividend and after a cash dividend

##### Solution Preview

a. A 10% stock dividend would mean thet 100,000X10%=10,000 shares would be issued. The current market price is \$5. Total amount taken from retained earnings will be 10,000X5=50,000. The common stock account ...

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