TIM Corporation had 2,200,000 shares outstanding at the beginning of the year, with a common stock book value of $7,150,000. TM’s retained earnings at the start of the year were $2,000,000. On February 1, the company declared a $0.50 dividend per share, payable on March 1. On August 1, TIM issued a 10% stock dividend at a time when shares were trading at $3.75.
a) Determine retained earnings and total shareholders’ equity after the cash dividend payment.
b) Determine the cost of stock dividend and the total number of shares after the stock dividend payment.
c) Determine the common stock book value, retained earnings and shareholders’ equity after the stock dividend payment.