Chapter 11 Stockholders’ Equity: Capital Stock and Dividends 519c. Where will the balance in Paid-In Capital from Sale of Treasury Stock be reported on the
balance sheet?
d. For what reasons might Aspen Inc. have purchased the treasury stock?Golden Hearth Corporation wholesales ovens and ranges to restaurants throughout the
Midwest. Golden Hearth Corporation, which had 25,000 shares of common stock outstanding,
declared a 5-for-1 stock split (4 additional shares for each share issued).a. What will be the number of shares outstanding after the split?
b. If the common stock had a market price of $165 per share before the stock split, what
would be an approximate market price per share after the split?Triangle Media Group, Inc., issued 15,000 shares of $0.10 par value common stock at a price of
$50 per share on January 1, 2007. The proceeds will be used to invest in a project that is expected
to generate a 12% annual return. The base earnings per share without the impact of the new
investment is $4.00 for each of the 135,000 common shares. Ignore income taxes.a. Determine the estimated earnings per share for 2007, including the impact of the new
investment.
b. Assume the return on the investment was only 4%. What would be the impact on earn-
ings per share under this assumption?Sunrise Developments, Inc., is considering two financing alternatives for a $9,500,000 retail com-
plex. One option is to issue 250,000 shares of common stock at a price of $38 per share. The sec-
ond option is to borrow $9,500,000 at an interest rate of 6%. The new complex is expected to
yield a before-tax return of 10%. The before-tax earnings before considering either financing al-
ternative is $6,250,000. There are 2,000,000 shares of common stock outstanding prior to consid-
ering financing alternatives. The tax rate is 20%.a. Determine the estimated earnings per share impact from the two financing alternatives.
b. Which alternative has the most favorable impact on earnings per share?Indicate whether the following actions would (+) increase, () decrease, or (0) not affect Indigo
Inc.’s total assets, liabilities, and stockholders’ equity:Stockholders’
Assets Liabilities Equity
(1) Declaring a cash dividend ———— ———— ————
(2) Paying the cash dividend declared in (1) ———— ———— ————
(3) Authorizing and issuing stock certificates
in a stock split ———— ———— ————
(4) Declaring a stock dividend ———— ———— ————
(5) Issuing stock certificates for the stock
dividend declared in (4) ———— ———— ————The important dates in connection with a cash dividend of $120,000 on a corporation’s common
stock are February 13, March 15, and April 10. Record the entries required on each date.Exercise 11-13
Effect of stock split
Goal 5
Exercise 11-14
Common stock dilution
Goal 6
Exercise 11-15
Common stock and bond
financing alternatives
Goal 6
Exercise 11-16
Effect of cash dividend and
stock split
Goals5, 7
Exercise 11-17
Entries for cash dividends
Goal 7