Midge Inc. Shareholder\'s Equity As at Dec. 31,2015 Common Shares, no-par; 500,0
ID: 2560021 • Letter: M
Question
Midge Inc. Shareholder's Equity As at Dec. 31,2015 Common Shares, no-par; 500,000 shares authorized; 80,000 issued and outstanding Retained Earnings» Total Shareholders' Equity 600,000 $1,600,000 2016 Transactions Mar» 3 Issued 5,000 common shares at $20 per share.. June- 11., Declared a cash dividend of $0.25 per share to common shareholders of record on June 25, payable on July 6. Declared a 5% stock dividend to common shareholders of record on September 5, distributable on September 20. The shares were trading for $22 a share on August 21, $24 on September 5, and S26 on September 20.* Aug.q) 21- Nov.Explanation / Answer
11 march:- total shares on record date 25 june= 80000+5000=85000
divdend amont declared= 85000*0.25 per share = 21250, there will be no entry on record date (25 june) since record date merely determines the name of the stockholders that will receive the dividends.
21 aug:-corporation has 85000 shares of common stock, stcok divdend 5%,
this means that 85000shares*5% =4250 new shares of stock will be issued to existing shareholders . the market price of the stock on the date of declaration is relevant($22).the concept of record date is same as above.in this case share holders receive stocks hence their common stock increases.
20 dec:- on this date total shares of corporation is =80000+5000+4250+3000=92250
dividend payable = 92250*0.3 =27675
Shareholders euity as on 31st dec :-
common stock, no par 500000 shares authorized,92250 shares issued
(600000+100000+93500+75000)
b) in this case for 1 share ,shareholders are getting 3 shares now .
i) after the split 3 for 1 share i.e. = 10000*3=30000 shares will be issued
ii) typical journal entry with debits and credits in not needed since the total dolar amount and other components of shareholders equity doesnt changes.only amemo entry to note that total number of shares has changed.
iii) likely share price will be = 120/3 = 40$ per share.
total market cap before split =120*10000=1,200,000
total market cap after split = 40*30000=1,200,000 (i,e, will remain same)
Date description debits credits mar 3 cash (5000*20=100000) 100,000 common stock 100,000 (being share issued)