I am having difficulty figuring out the rest of this problem, primarily with regards to calculating...

Free

60.1K

Verified Solution

Question

Accounting

I am having difficulty figuring out the rest of this problem,primarily with regards to calculating APIC and Retained earningsfor Stock Dividends. Also, I need assistance with the fourthproblem, how to calculate the total value of shareholders'equity.

Could you please help show me how to solve?

Accounting for Share Transactions
The shareholders' equity section of the consolidated balance sheetof Wilson Industries appeared as follows at the beginning of theyear:

Shareholders' Equity
Class A common stock, $0.04 par value; 20,000,000shares authorized;
6,100,000 shares issued$244,000
Additional paid-in-capital472,508,000
Retained earnings57,080,000
Currency translation adjustment(9,648,000)
Total equity$520,184,000

The following events occurred sequentially during the year:

  1. A 2-for-1 forward stock split was executed.
  2. A ten percent stock dividend was distributed when the Wilsonshare price was $80 per share.
  3. Treasury stock valued at $12,000,000 was repurchased when theWilson share price was $75 per share.

Required

1. How many Class A common shares are outstanding following theabove events?

13260000

2. What is the par value per share of the Class A common stockfollowing the above events? Round to the nearest three decimalplaces.

$0.02

3. Prepare a spreadsheet to illustrate the financial effectsassociated with the above three share transactions.

Use a negative sign with answers to indicate a reduction in anaccount balance and with treasury stock repurchase and balance.

Wilson Industries


Transaction

Stock
Split

Stock
Dividend

Share
Repurchase
Balance
Sheet
Totals
Assets
Cash$0$0$

-12000000

$

-12000000

Shareholders' Equity
Common stock

0

24400

0

24400

APIC0????

0

????

Retained earnings0????0????
Treasury stock

0

0

-12000000

-12000000

Total Shareholders' Equity$

????

4. Calculate the total value of shareholders' equity followingthe above events.

$????

Answer & Explanation Solved by verified expert
4.2 Ratings (807 Votes)

1 Class A of common shares outstanding:
No.of
shares
Beginning balance 6100000
Stock split
(2 for 1 stock split will double the number of common shares) 6100000
Stock dividend (6100000+6100000)*10% 1220000
13420000
Less: Treasury stock (Note:1) 160000
Common shares outstanding 13260000
Note:1
Treasury stock valued at $ 12000000 when share price was $ 75 per share
Number of shares repurchased=12000000/75=160000 shares
2 Par value of common shares will halve since there is a 2 for 1 stock split
Par value=0.04*1/2=$ 0.02
3 Wilson industries
Transaction Beg.
Bal.
Stock
split
Stock
dividend
Share
repurchase
Balance
sheet
totals
Assets
Cash -12000000
Shareholder's equity
Common stock 244000 24400 268400
(1220000*$ 0.02)
APIC 472508000 97575600 570083600
1220000*(80-0.02)
Retained earnings 57080000 -97600000 -40520000
(1220000*80)
Currency translation adjustment -9648000 -9648000
Treasury stock -12000000 -12000000
Total shareholder's equity 508184000
Note:
Stock split don’t require any journal entries.So, no effect on balance sheet amounts.It simply increase the number of common shares
4 Value of shareholder's equity=$ 508184000

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students