1.

The stockholders’ equity section of the balance sheet of West Wind company at
December 31, 2019, is given below:

On 31 January 2020, the board of directors proposed a 5-for-4 stock split. The proposal was
approved and new shares were distributed among stockholders.
Required: (Show your solution)

Compute the number of shares that were distributed among stockholders as a result of 5-for-4
stock split. 3 pts.

1. Compute the par value per share after this split. 2 pts.
2. What accounting entry will be made for this split? 2 pts.
3. Show stockholders’ equity section of the company immediately after 5-for-4 stock split. 3
pts.

2. Firm A had the following selected items on its balance sheet: (Show your solution)
Cash 28,000,000
Common stock (50 par, 2,000,000 shares outstanding) 100,000,000
Additional paid-in capital 10,000,000
Retained earnings 62,000,000

How would each of these accounts appear after: (Show your solution)
a. A cash dividend of 1 per share? 2 pts.
b. A 5 percent stock dividend (fair market value is 100 per share)? 2 pts.
c. A one-for-two reverse split? 2pts.

3. The Capital Structure of Orchard Corp. is as follows:

During the current year, management declared a dividend of $70,000. Dividend on preferred
stock are 6% of par value and have been paid each year except for the immediate past year.
The number of shares issued and outstanding of both the types of stock have not changed for
the last two years.

Required: (Show your solution)

Calculate the amount of dividend that will be paid to preferred stockholders and common
stockholders if:

1. the preferred stock is noncumulative. 2 pts.

2. the preferred stock is cumulative. 2 pts.