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|. Satisfy expectations of stockholders without spending cash. 2. Increase marketability of stock by increasing the number of shares outstanding and thereby decreasing the market price per share. 3, Emphasize the permanent reinvestment of stockholders’ equity that is unavailable for dividends. BOARD OF DIRECTORS + SUMMARY OF STOCK DIVIDEND ENTRIES. Declaration Date Retained Earnings 200 ‘Common Stock Dividends Distributable Paid-in Capital in Excess of Par 00 300K Issuance Date ‘Common Stock Dividends Distributable... xxx ‘Common Stock. OK Small stock dividends | Retained earnings reduced by F.M.V. of stock. Large stock dividends | Retained earnings reduced by par value of stock. STOCKHOLDERS atockholders Equity Before a 10% stock Dividend Stockholders’ Equity Paid-in capital ‘Common stock, $10 par value, 100,000 shares issued and outstanding $1,000,000 Additional paid-in capital in excess of par value 200,000 Total paid-in capital 1,200,000 Retained earnings 300,000 Total stockholders’ equity $1,500,000 (Market Value = $15) Board of Directors Declares and Distributes a 10% Stock Dividend Entries: Retained Earnings 150,000 ‘Common Stock Dividends Distributable 100,000 Paid-in Capital in Excess of Par Value 50,000 ‘Common Stock Dividends Distributable 100,000 ‘Common Stock 100,000 Stockholders! Equity After a 10% Stock Dividend Stockholders’ Equity Paid-in capital ‘Common stock, $10 par value, 110,000 shares issued and outstanding $1,100,000 ‘Additional paid-in capital in excess of par value 250,000 Total paid-in capital 1,350,000 Retained earnings 150,000 For the Year Ended December 31, 2002 Sales $800,000 Cost of Goods Sold 550,000, Gross Proft 250.000, Operating Expenses 50,000 ‘Operating income 2eaan0 Other Revenues and Gains 150% Other Expenses and Losses 25,000 ete fom income before Income Taxes 130,000 my income Taxee $7,000. Garcon Income from Continuing Operations 133,000 Discontinued Operations: Net of $12,000 Tax Savings $(28,000) Loss from Operations of Video Division, Loss on Disposal of Video Division, ‘Net of $27,000 Tax Savings (63,000) (91,000) Income before Extraordinary Item ‘and Cumulative Effect of ‘Change in Accounting Principle 42,000 Extraordinary item: Gain from Expropriation of Investment, [Net of $15,000 Income Taxes 35,000 ‘Cumulative Effect of Change in Accounting Principle: Effect on Prior Years of Change in reciation Method, Net of $9,000 income Tax Savings 21,000) Net Income 56,000 Earnings Per Share (20,000 Shares) Income from Continuing Operations $6.65 Loss from Discontinued Operations, Net of Tax (1-40) Loss on Disposal of Discontinued Operations, Net of Tax ais Income before Extraordinary Item and Cumulative Effect. §—§ ——' ee 2.10 Extraordinary Gain, Net of Tax 175 ‘Cumulative Effect of Change in Accounting Principle,