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Dividend Policy The following represents the stockholder's equity account of Security Data Company: R Preferred stock Common stock (R4 par) Paid-in capital in excess of par Retained earnings R200,000 R200,000 R350,000 R350,000

Dividend Policy The following represents the stockholder's equity account of Security Data Company: R Preferred stock Common stock (R4 par) Paid-in capital in excess of par Retained earnings R200,000 R200,000 R350,000 R350,000

Financial Accounting: The Impact on Decision Makers
Financial Accounting: The Impact on Decision Makers
10th Edition
ISBN:9781305654174
Author:Gary A. Porter, Curtis L. Norton
Publisher:Gary A. Porter, Curtis L. Norton
Chapter11: Stockholders' Equity
Section: Chapter Questions
Problem 11.1E
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Question 1 Dividend Policy The following represents the stockholder's equity account of Security Data Company: R Preferred stock Common stock (R4 par) Paid-in capital in excess of par Retained earnings Total stockholder's equity Additional information provided: Current share price Earning Available to Common Shareholders (EACS) The frm is considering a 5% stock dividend. Preferred stock Common stock (R4 par) Paid-in capital in excess of par Retained earnings Total stockholder's equity A. Rework the stockholder's equity account for Security Data Company should the firm decide to implement the stock dividend. New Current R200,000 par value Current Price Shares outstanding Earning Available to Common Shareholders (EACS) stock dividend Increase in shares Total dividend value R200,000 R200,000 New price Current EPS New EPS R350,000 R350,000 R1,100,000 R40 R120,000 Investor shares Current ownership New ownership R200,000 R350,000 R350,000 R1,100,000 R4 R40 B. Determine the current earnings per share (EPS) and the new EPS if the stock dividend is implemented. R120,000 0.05 C. An investor owns 600 shares of common stock. Does the investor's ownership value change? Show detailed workings to validate your answer. 600
Transcribed Image Text:Question 1 Dividend Policy The following represents the stockholder's equity account of Security Data Company: R Preferred stock Common stock (R4 par) Paid-in capital in excess of par Retained earnings Total stockholder's equity Additional information provided: Current share price Earning Available to Common Shareholders (EACS) The frm is considering a 5% stock dividend. Preferred stock Common stock (R4 par) Paid-in capital in excess of par Retained earnings Total stockholder's equity A. Rework the stockholder's equity account for Security Data Company should the firm decide to implement the stock dividend. New Current R200,000 par value Current Price Shares outstanding Earning Available to Common Shareholders (EACS) stock dividend Increase in shares Total dividend value R200,000 R200,000 New price Current EPS New EPS R350,000 R350,000 R1,100,000 R40 R120,000 Investor shares Current ownership New ownership R200,000 R350,000 R350,000 R1,100,000 R4 R40 B. Determine the current earnings per share (EPS) and the new EPS if the stock dividend is implemented. R120,000 0.05 C. An investor owns 600 shares of common stock. Does the investor's ownership value change? Show detailed workings to validate your answer. 600
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