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Dividends, Stock Splits, and Stockholder's Equity

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The stockholder's equity section of Rigby Moving and Storage Company's balance sheet as of December 31, 20x7 is shown below.

Contributed Capital
Common Stock, $2 par value, 3,000,000 shares authorized
500,00 shares issued and outstanding $1,000,000
Additional Paid-In capital 400,000

Total Contributed Capital $1,400,000

Retained Earnings $1,080,000

Total Stockholders Equity $2,480,000

The company engaged in the following stockholder's equity transactions during 20x8:

Mar 5 Declared a $.40 per share cash dividend to be paid on April 6 to stockholders of record March 20

Mar 20 Date of record

Apr 6 Paid the cash dividend

June 17 declared a 10 percent stock dividend to be distributed August 17 to stockholders of record on Aug 5. The market value of the stock was $14 per share.

Aug 5 Date of Record
17 Distributed the stock dividend

Oct 2 Split its stock 2 for 1

Dec 27 Declared a cash dividend of $.20 payable January 27, 20x9, to stockholders of record on January 14, 20x9.


1. Record the 20x8 transactions in journal form
2. Prepare the stockholder's equity section of the company's balance sheet as of December 31, 20x8. Assume net income for the year is $400,000

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Solution Summary

Using an Excel 97-2003 spreadsheet, this solution illustrates the effects of cash and stock dividends, as well as stock splits, on the company's stockholder's equity section.

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