A company with 50000 authorized shares of 1 par common stock

A company with 50,000 authorized shares of $1 par common stock issued 10,000 shares at $10 per share, Subsequently, the company declared and paid a $3 cash dividend per share. On the date the company declared the dividend, the market price of the shares was $30 per share.

What is the effect of the dividend on Retained Earnings?

Retained earnings decreased

Retained earnings increased

Retained earnings remained the same

None of the above.

Refer to the previous question. By what amount did Retained Earnings change, of at all? ( If the account balance or amount did not change, state your answer as “$0”)

What is the effect of the dividend on Common Stock?

Common stock decreased

Common stock increased

Common stock remained the same

None of the above

Refer to the previous question. By what amount did Common Stock change, of at all? (If the account balance or amount did not change, state your answer as “$0”)

What is the effect of the dividend on Paid-in- Capital?

Paid-in Capital decreased

Paid-in Capital increased

Paid-in Capital remained the same

None of the above

Refer to the previous question. By what amount did Paid-in Capital change, of at all? (If the account balance or amount did not change, state your answer as “$0”)

What is the effect of the dividend on the number of shares outstanding?

The number decreased

The number increased

The number remained the same

None of the above

Refer to the previous question. By what amount did the number of shares outstanding change, if at all? (If the account balance or amount did not change, state your answer as “$0”)

What is the effect of the dividend on total equity and total assets?

Total equity decreased, and total assets decreased

Total equity decreased, and total assets increased

Total equity increased, and total assets decreased

Total equity increased, and total assets increased

None of the above

Refer to the previous question. By what amount did total equity and total assets change if at all? (If the account balance or amount did not change, state your answer as “$0”)

Solution

A company with 50,000 authorized shares of $1 par common stock issued 10,000 shares at $10 per share, Subsequently, the company declared and paid a $3 cash dividend per share. On the date the company declared the dividend, the market price of the shares was $30 per share.

Q1) What is the effect of the dividend on Retained Earnings?

Answer----Retained earnings decreased

Q2) Refer to the previous question. By what amount did Retained Earnings change, of at all? ( If the account balance or amount did not change, state your answer as “$0”)

Answer ----- $ 3 per share dividend is ($3x60000 shares) $180000 decrease in Retained earnings.

Q3) What is the effect of the dividend on Common Stock?

Answer----Common stock remained the same.

Q4) Refer to the previous question. By what amount did Common Stock change, of at all? (If the account balance or amount did not change, state your answer as “$0”)

Answer ---- $0

Q5) What is the effect of the dividend on Paid-in- Capital?

Answer -----Paid-in Capital remained the same

Q6) Refer to the previous question. By what amount did Paid-in Capital change, of at all? (If the account balance or amount did not change, state your answer as “$0”)

Answer -----$0

Q7) What is the effect of the dividend on the number of shares outstanding?

Answer-----The number remained the same

Q8) Refer to the previous question. By what amount did the number of shares outstanding change, if at all? (If the account balance or amount did not change, state your answer as “$0”)

Answer-----$0

Q9) What is the effect of the dividend on total equity and total assets?

Answer-----Total equity decreased, and total assets decreased

Q10) Refer to the previous question. By what amount did total equity and total assets change if at all? (If the account balance or amount did not change, state your answer as “$0”)

Answer-----Decrease in Total Equity by $180000 Decrease in total Asset by $180000. Because Retained earnings decreases Total Equity and Dividend is paid out o equity. Cash is paid so Total asset is also decreased.