Cash Dividends, Stock Dividends, and Stock Splits
Response to the following problem:
HiTech Manufacturing Company has 1,000,000 shares of $1 par value capital stock outstanding on January 1. The following equity transactions occurred during the current year:
Apr. 30 Distributed additional shares of capital stock in a 2-for-1 stock split. Market price of stock was $37 per share.
June 1 Declared a cash dividend of $0.41 per share.
July 1 Paid the $0.41 cash dividend to stockholders.
Aug. 1 Declared a 5 percent stock dividend. Market price of stock was $19 per share.
Sept. 10 Issued shares resulting from the 5 percent stock dividend declared on August 1.
a. Prepare journal entries to record the above transactions. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
b. Compute the number of shares of capital stock outstanding at year-end.
c. What is the par value per share of HiTech Manufacturing stock at the end of the year? (Round your answer to 2 decimal places.)
d. Determine the effect of each of the following on total stockholders' equity: stock split, declaration and payment of a cash dividend, declaration and distribution of a stock dividend. (Your answers should be either increase, decrease, or no effect. )