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Dividends, Stock Splits, and Stockholder's Equity

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.

Required:

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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