Dividends and Stock Split Transactions and Stockholder’s Equity
The stockholders’ equity section of Rigby Moving and Storage Company’s balance sheet as of December 31, 20×6, appears at the top of the next page. The company engaged in the following stockholders’ equity transactions during 20×7:
Mar. 5 Declared a $.40 per share cash dividend to be paid on April 6 to stockholders of record on March 20.
20 Date of record.
Apr. 6 Paid the cash dividend.
June 17 Declared a 10 percent stock dividend to be distributed August 17 to stockholders of record on August 5. The market value of the stock was $14 per share.
Aug. 5 Date of record.
17 Distributed the stock dividend.
Oct. 2 Split its stock 2 for 1.
Dec. 27 Declared a cash dividend of $.20 payable January 27, 20×8, to stockholders of record on January 14, 20×8.
Required
1. Record the 20×7 transactions in journal form.
2. Prepare the stockholders’ equity section of the company’s balance sheet as of December 31, 20×7. Assume net income for the year is $400,000.
3. User Insight: If you owned some shares of Rigby, would you expect the total value of your shares to go up or down as a result of the stock dividends and stock split? What intangibles might affect the stock value?