Some people like to play a game that constructs a sequence of chemical elements where each element in the sequence begins with the last letter of its predecessor. For example,….
Prepare the stockholders’ equity section of the company’s balance sheet as of December 31, 20×7.
Dividends, Stock Splits, and Stockholders’ Equity
The stockholders’ equity section of Waterbury Linen Mills, Inc., as of December 31, 20×6, was as follows:
A review of the stockholders’ equity records of Waterbury Linen Mills, Inc., disclosed the following transactions during 20×7:
Mar. 25 The board of directors declared a 5 percent stock dividend to stockholders of record on April 20 to be distributed on May 1. The market value of the common stock was $21 per share.
Apr. 20 Date of record for stock dividend.
May 1 Issued stock dividend.
Sept. 10 Declared a 3-for-1 stock split.
Dec. 15 Declared a 10 percent stock dividend to stockholders of record on
January 15 to be distributed on February 15. The market price on this date is $9 per share.
1. Record the stockholders’ equity components of the transactions for Waterbury
Linen Mills, Inc., in T accounts.
2. Prepare the stockholders’ equity section of the company’s balance sheet as of December 31, 20×7. Assume net income for 20×7 is $247,000.
3. User Insight: If you owned 1,000 shares of Waterbury Linen Mills stock on May 1, 20×7, how many shares would you own on February 15, 20×8? Would your proportionate share of the ownership of the company be different on the latter date than it was on the former date? Explain your answer.