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Equity Changes from Stock Transactions

The document summarizes the effects on Myers Co.'s balance sheet of various dividend declarations and transactions: 1) A cash dividend decreases total assets and retained earnings. 2) A share dividend increases share capital and decreases retained earnings, with no effect on total equity. 3) A property dividend decreases total assets and retained earnings by the dividend amount less any gain on the property. 4) A share split has no effect on the balance sheet.

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116 views2 pages

Equity Changes from Stock Transactions

The document summarizes the effects on Myers Co.'s balance sheet of various dividend declarations and transactions: 1) A cash dividend decreases total assets and retained earnings. 2) A share dividend increases share capital and decreases retained earnings, with no effect on total equity. 3) A property dividend decreases total assets and retained earnings by the dividend amount less any gain on the property. 4) A share split has no effect on the balance sheet.

Uploaded by

Siska Triandriyani
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as XLSX, PDF, TXT or read online on Scribd

ANSWER

a. Assumsing Myers Co. Declares and pays a €1 per share cash dividend.
1. Total assets - decrease €4.000 [(€20.000 ÷ €5) x €1)
2. Share capital - ordinary - no effect
3. Share premium - ordinary - no effect
4. Retained earnings - decrease €4.000
5. Total equity - decrease €4.000

b. Myers declares and issues a 10% share dividend when the market
price of the stock is €14
1. Total assets - no effect
2. Share capital - ordinary - increase €2.000 (4.000 x 10%) x €5
3. Share premium - ordinary - increase €3.600 (400 x €14) - €2.000
4. Retained earnings - decrease €5.600 (€14 x 400)
5. Total equity - no effect

c. Myers declares and issues a 100% share dividend when the market
price of the stock is €15 per share
1. Total assets - no effect
2. Share capital - ordinary - increase €20.000 (4.000 x 100%) x €5
3. Share premium - ordinary - no effect
4. Retained earnings - decrease €20.000
5. Total equity - no effect

d. Myers declares and distributes a property dividend


1. Total assets - decrease €14.000 (2.000 x €7) - €6.000 gain less €20.000
dividend
2. Share capital - ordinary - no effect
3. Share premium - ordinary - no effect
4. Retained earnings - decrease €14.000 - €6.000 gain less €20.000
dividend
5. Total equity - decrease €14.000

The journal entries made for the above transaction are :


Invesment in ABC stock (€10 - €7) x 2.000 6,000
Gain on Appreciation of Securities 6,000
(To record increase in value of
securities to be issued)

Retained earnings (€10 x 2.000) 20,000


Invesments in ABC Stock 20,000

e. Myers declares a 2-for-1 share splits


1. Total assets - no effect
2. Share capital - ordinary - no effect
3. Share premium - ordinary - no effect
4. Retained earnings - no effect
5. Total equity - no effect

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