Global Corporation had 53000 shares of 20 par value common s

Global Corporation had 53,000 shares of $20 par value common stock outstanding on July 1. Later that day the board of directors declared a 20% stock dividend when the market value of each share was $30. The entry to record the dividend declaration Is Mutiple Choice No entry is made unl the stock is ssued Debit Retained Eamings $212,000; credit Common Stock Dividend Distributable $212,000 Debit Retained Earnings $318,000 credit Common Stock Dividend Distributable $212,000 credit Paid-in Capital n Excess of Par Velue, Common Stock $106,000 Debit Retained Eamings $318.000, credit Common Stock Dividend Distributable $318.000 Pre 21 of 25 Next > 8 command option

Solution

1) Debit Retained Earnings $318,000; credit Common Stock Dividend Distributable $212,000; credit Paid-In Capital in Excess of Par Value, Common Stock $106,000.

Retained earnings: 53,000 shares * 20% x $30 = $318,000
Common Stock Dividend Distributable: 53,000 shares * 20% x $20 = $212,000
Paid-in Capital in Excess of Par Value, Common Stock: 53,000 shares *20%* $10 = $106,000

2) $22,900 preferred; $32,300 common

Preferred stock dividend = 1,900 x $100 x 5% = $9,500

Year 1:

Dividend Paid to Preferred Shareholders = $3,900

Dividend Paid to Common Shareholders = $0 (As amount of profit is less)

Year 2:

Dividend Paid to Preferred Shareholders = $9,500

Dividend Paid to Common Shareholders = $300 ($9,800 – 9,500)

Year 3:

Dividend Paid to Preferred Shareholders = $9,500

Dividend Paid to Common Shareholders = $32,000 ($41,500 – 9,500)

3) Dividend Yield = Annual Dividend / Market Price per share

                           = 0.76 / 26.50 *100 = 2.87%

4) Book Value per Common Share

= Total Value of Common Shares* / Number of Common Shares Outstanding

= (704,400 – 170,000) / 32,000 = $16.7

* Total Stock holders’ Equity – Value of Preferred Shares