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    Effects of stock dividends, splits and treasury stock

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    Identify the effects of the following transactions on total stockholders' equity. Each transaction is independent.

    A. A 10% stock dividend. Before the dividend, 500,000 shares of $1 par common stock were outstanding; market value was $6 at the time of the dividend.

    B. A 2-for-1 stock split. Prior to the split, 60,000 shares of $4 par common were outstanding.

    C. Purchase of 1,000 shares of treasury stock (par value $0.50) at $5 per share.

    D. Sale of 600 shares of $1 par treasury stock for $5 per share. Cost of the treasury stock was $2 per share.

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    Solution Preview

    A. This is a "small" stock dividend. So the amount they will reclassify from RE to contributed capital will be 10% x 500,000 shares = 50,000 shares @ market value (because ...

    Solution Summary

    The effects of stock dividends, splits and treasury stocks are examined.