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Andrew [12]
3 years ago
12

To reduce its stock price, Shriver Food Systems, Inc., declared and issued a 100 percent stock dividend. The company has 860,000

shares authorized and 260,000 shares outstanding. The par value of the stock is $1 per share and the market value is $100 per share. Prepare the journal entry to record this large stock dividend. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)
Business
1 answer:
harkovskaia [24]3 years ago
6 0

Answer:

Dr. Retained Earning                    $86,000,000

Cr. Common Stock                       $860,000

Cr. Paid-in-Capital excess of par $85,140,000

Explanation:

Stock dividend is the payment of dividend to stockholder in the form of stock/shares of the company. Stock are issued at the market price and the value of the dividend is transferred from the retained earning to the add-in-capital accounts.

Dividend Value = 860,000 x 100 = $86,000,000

Par Value of Stocks = $1 x 860,000 = $860,000

Add-in-capital excess of par common stock = ($100-$1) x 860,000 = $85,140,000

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Income Statement For the Year Ended on December 31 J&H Corp. Industry Average Net sales $39,000,000 $48,750,000 Operating co
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Answer:

1.J&H Corp’s NOPAT is $3,744,000, which is $936,000 lower than industry average of $4,680,000

2.Net operating working capital of $18,000 is been used by the company.

3.J&H Corp will be generating $5,019,600 in net cash flow from its operations and an accounting profit of $3,369,600

4.Therefore the firm uses $978,000 of total net operating capital to run the business.

Explanation:

J&H Corp

1. Calculation for NOPAT

NOPAT = 6,240,000 x (1- 40%)

= 6,240,000 x (1 – 0.4)

= 6,240,000 x 0.6

= $3,744,000

Calculation for Industry Average

Industry Average= 7,800,000 x (1- 40%)

7,800,000×(1-0.4)

7,800,000×0.6

=$4,680,000

Hence:

($4,680,000-$3,744,000)=$936,000

J&H Corp’s NOPAT is $3,744,000, which is $936,000 lower than industry average of $4,680,000

2:Calculation for Net Operating Working Capital

Net Operating Working Capital= Current Operating Assets − Current Operating Liabilities

Net Operating Working Capital= (Cash + Accounts Receivable + Inventories)− (Accounts Payable + Accrued Expenses)

Short term investments won't be included in Current Operating Assets

Given current assets = $600,000 ×12% in Short term investments = $72,000

Therefore Current Operating Assets will be: 600,000 – 72,000 = $528,000

Current Operating Liabilities = $510,000

Net Operating Working Capital

= $528,000 - $510,000 = $18,000

Net operating working capital of $18,000 is been used by the company.

3. Calculation for Net cash flow operations

Net cash flow from operations = Net income + Depreciation & Amortization + Changes in Working Capital

Changes in working capital = Working capital of the year

= $600,000 - $510,000

= $90,000

Net cash flow from operations will be:

$3,369,600 + $1,560,000 + $90,000 = $5,019,600

The Accounting profit will be the total revenue less the explicit costs

Explicit costs includes operating expenses, depreciation, interest and taxes.

Hence, the Accounting Profit will be :

Net income = $3,369,600

J&H Corp will be generating $5,019,600 in net cash flow from its operations and an accounting profit of $3,369,600

4. Calculation for the Total net operating capital

Total net operating capital = Net Operating Working Capital + Non-current Operating Assets

$528,000 - $510,000 = $18,000

Net Operating Working Capital = $18,000

Non-current Operating Assets = operating long term assets = $960,000

Total net operating capital

= $18,000 + $960,000

= $978,000

Therefore the firm uses $978,000 of total net operating capital to run the business. Thus the value is been computed as the sum of J&H Corp’s net operating working capital and its Non-current Operating Assets.

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