Answer:
Total Stockholders' equity was affected.
Explanation:
Stock dividend refers to distributing shares free of cost among the existing shareholders. Such a dividend does not result in resources flowing out of the entity but merely reassign amounts from retained earnings to other equity accounts. Thus, such a dividend does not affect the total equity of the stockholders. This can be seen through the following entry,
Retained Earnings $1,800,000 Dr
Common Stock, at par $1,200,000 Cr
Paid in Capital in excess
of par, Common Stock $600,000 Cr
The above transaction shows that we just redistributed the reserves by reducing retained earning by the value of stock dividend 1800000 [( 800000*0.15) * $15] and adding it to the Common Stock 1200000 [(800000*0.15) * 10] and to paid in capital in excess of par 600000 [(800000*0.15) * 5].
Answer:
$1,256,000
Explanation:
Data provided in the question:
Number of semiannual payments received = 16
Amount of each payment = $100,000
Annual interest rate = 6%
Thus,
Semiannual interest rate = 
= 3% = 0.03
Now,
Payment = Amount × 
or
Payment = $100,000 × 
Payment = $100,000 × 12.56
or
Payment = $1,256,000
Answer: $540,000
Explanation:
Given that,
Fair value of the common stock = $30 per share
Common stock, $10 par value, authorized 200,000 shares;
issued and outstanding 120,000 shares = $1,200,000
Additional paid-in capital on common stock = $150,000
Retained earnings = $700,000
Total stockholders' equity = $2,050,000
Declared a dividend of 15%:
= 120,000 × $30 × 15%
= $540,000
Since, dividends are paid out Retained earnings. Therefore, retained earnings will decrease by an amount of $540,000.
Cost of equity is calculated as -
Cost of equity = Risk free return + Beta * (Market risk - Risk free return)
Given,
Risk free return = 5.3 %
Market risk = 12 %
Beta = 1.05
Cost of equity = 5.3 % + (1.05*(12-5.3%))
Cost of equity = 12.335 % or 12.24 %
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