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Stockholders’ Equity
15 - 19
Diamond’s Corporation has an investment in 5,000 shares of Sigmond Company common
stock with a cost of $218,000. These shares are used in a property dividend to
stockholders of Diamond’s. The property dividend is declared on May 25 and scheduled to
be distributed on July 31 to stockholders of record on June 15. The market value per
share of Sigmond stock is $63 on May 25, $66 on June 15, and $68 on July 31. The net
effect of this property dividend on retained earnings is a reduction of
a. $340,000.
b. $330,000.
c. $315,000.
d. $218,000.
Gonzalez Company has 350,000 shares of $10 par value common stock outstanding.
During the year, Gonzalez declared a 10% stock dividend when the market price of the
stock was $30 per share. Four months later Gonzalez declared a $.50 per share cash
dividend. As a result of the dividends declared during the year, retained earnings
decreased by
a. $1,242,500.
b. $525,000.
c. $192,500.
d. $175,000.
On June 30, 2007, when Vietti Co.'s stock was selling at $65 per share, its capital
accounts were as follows:
Capital stock (par value $50; 60,000 shares issued)
Premium on capital stock
Retained earnings
If a 100% stock dividend were declared and distributed, capital stock would be
a. $3,000,000.
b. $3,600,000.
c. $6,000,000.
d. $7,800,000.
The stockholders' equity section of Lawton Corporation as of December 31, 2006, was as
Common stock, par value $2; authorized 20,000 shares;
issued and outstanding 10,000 shares
$ 20,000
Paid-in capital in excess of par
Retained earnings
On March 1, 2007, the board of directors declared a 15% stock dividend, and accordingly
1,500 additional shares were issued. On March 1, 2007, the fair market value of the stock
was $6 per share. For the two months ended February 28, 2007, Lawton sustained a net
loss of $10,000.
What amount should Lawton report as retained earnings as of March 1, 2007?
a. $56,000.
b. $62,000.
c. $66,000.
d. $72,000.
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