Chapter 12
Stockholders Equity
Stock Dividends, Stock Splits, &
Other SHE Wonders
BE12-2, E12-1, E12-13, E12-14 (a-d), P12-10 (a-c)

BE12-2 Stock Splits and Market Value
When Tandy (Radio Shack) Corporation announced a
2:1 stock split, it had 97 million shares outstanding, trading at $100 per share. a. Estimate the number of shares outstanding and market price per share immediately after the split. b. Estimate the company’s overall market value, and explain whether you expect the company’s overall market value to change due to the split.

E12-1 SHE Transactions
For each transaction indicate which SHE accounts are affected, whether these accounts increase or decrease, and the transaction’s effect on total SHE.
1. Issue common stock above par for cash.
2. Declare a 3-for-1 stock split.
3. Repurchase 10,000 shares of own stock for cash.
4. Declare and issue a stock dividend. Market>Par

E12-1 SHE Transactions
For each transaction indicate which SHE accounts are affected, whether these accounts increase or decrease, and the transaction’s effect on total SHE.
5. Reissue 1,000 treasury shares for $75. Treasury stock had been previously acquired for $60.
6. Pay cash dividend that had been previously declared.
7. Generate net income of $250,000.

• Preferred stock-10,000 shares authorized, 5,000 issued, cumulative, nonparticipating, $5, $10 par.
• Common stock-500,000 shares authorized, 200,000 shares issued, 50,000 held in treasury, no par. a. Compute the dividends paid to the preferred and common shareholders for each year. b. Compute the balance of dividends in arrears at yearend. c. Should dividends in arrears be considered a liability?
The company paid the following total cash dividends since 2008:
2008:$0
2009:$30,000
2010:$80,000
2011:$15,000
2012:$40,000

The company paid the following total cash dividends since
2008: 2008:$0; 2009:$30,000; 2010:$80,000;
2011:$15,000; and 2012:$40,000.
• Preferred stock-10,000 shares authorized, 5,000 issued, cumulative, nonparticipating, $5, $10 par.
• Common stock-500,000 shares authorized, 200,000 shares issued,
50,000 held in treasury, no par. c. Should dividends in arrears be considered a liability?

E12-14 Stock Dividends and Stock Splits
SHE as of 12.31.2012:
Common stock (10,000 shares issued @$6 par)
Additional paid in capital-common stock
Retained earnings
Less: Treasury stock (2,000 @ $12)
Total shareholders’ equity
$ 60,000
100,000
60,000
(24,000)
$196,000
Prepare journal entries for the following independent transactions: a.
Declare and distribute a 2% stock dividend when the market price of the stock was $70. b.
Declare a 3:2 stock split.

E12-14 Stock Dividends and Stock Splits
SHE as of 12.31.2012:
Common stock (10,000 shares issued @$6 par)
Additional paid in capital-common stock
Retained earnings
Less: Treasury stock (2,000 @ $12)
Total shareholders’ equity
$ 60,000
100,000
60,000
(24,000)
$196,000
Prepare journal entries for the following independent transactions: c. Declare a 10% stock dividend when the market price of the stock was $80. d. Declare a 2:1 stock split.

P12-10 Inferring Transactions from BS
Preferred stock (9%, $100 par value)
Common stock ($10 par value, 750,000 authorized,
90,000 issued, and 5,000 held in treasury
Additional paid in capital-preferred
Additional paid in capital-common
Retained earnings
Less: Treasury stock
Total shareholders’ equity
2012
$200,000
900,000
150,000
465,000
575,000
(110,000)
$2,180,000
2011
$110,000
750,000
35,000
298,000
495,000
$1,688,000 a.
How many shares of preferred stock were issued during 2012? What was the average issue price? b.
How many shares of common stock were issued during 2012? What was the average issue price?

P12-10 Inferring Transactions from BS
Preferred stock (9%, $100 par value)
Common stock ($10 par value, 750,000 authorized,
90,000 issued, and 5,000 held in treasury
Additional paid in capital-preferred
Additional paid in capital-common
Retained earnings
Less: Treasury stock
Total shareholders’ equity
2012
$200,000
900,000
150,000
465,000
575,000
(110,000)
$2,180,000
2011
$110,000
750,000
35,000
298,000
495,000
$1,688,000 c. Prepare the entry to record the repurchase of the company’s own stock during
2012? What was the average repurchase price?