Question : 21.Immediately before a 15% stock dividend was declared and distributed : 1241734

 

21.Immediately before a 15% stock dividend was declared and distributed on 20,000 shares of par $8 stock, the market price of the Coolidge Corporation’s stock was $18. Coolidge has total liabilities of $150,000 and total shareholders’ equity of $450,000.

 

Required:

 

(1)Give the journal entry to record the declaration and distribution of the stock dividend.

(2)Calculate Coolidge’scurrent ratio immediately after the stock dividend and comment.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

22.Immediately before a 3-for-1 stock split was declared and distributed on 20,000 shares of par $80 stock, Mikah Company has total liabilities of $260,000 and total shareholders’ equity of $320,000. Calculate Mikah Company’s debt/equity ratio immediately after the stock split.

 

 

 

23.Immediately before a $4,000 cash dividend was declared on 20,000 shares of par $80 stock, Sea Breeze Corporation has total liabilities of $220,000 and total shareholders’ equity of $180,000. Calculate Sea Breeze’s debt/equity ratio before and after the declaration of the cash dividend and indicate the effect the declaration had on this ratio.

 

 

24.Tropical Corporation has the following amounts as other revenue and expenses on its income statement.

Other revenue and expenses:

 

Gain from sale of treasury stock

$21,000

Interest revenue

4,200

Gain from sale of land

18,000

Appropriated retained earnings for self-insurance

(1,000)

Preferred dividends

(11,000)

Common dividends

(6,000)

Total

$25,200

List the items that do not belong on the income statement and indicate where each should be reported.

 

 

 

25.If a corporation distributes a 4-for-3 stock split on its $5 common stock, how much is the par value after the split?

 

 

 

26.Gomer Paper Corporation has the following balance sheet accounts immediately preceding an investing and financing decision:

Current assets

$67,000

Long-lived assets

75,000

Current liabilities

28,500

Long-term liabilities

22,000

Contributed capital

60,000

Retained earnings

30,000

 

A long-term debt covenant specifies that Gomer Paper’s debt/equity ratio cannot be greater than 1.0 and its current ratio must be at least 2.0.

 

Gomer Paper is going to invest $70,000 in new equipment. It is considering two methods of financing the investment. It can use $10,000 of its own money and obtain $60,000 from the issue of long-term debt. Alternatively, Gomer Paper can use $15,000 of its own money and obtain the remaining financing from the issue of stock.

 

A.Recalculate the balance sheet amounts given above for each of the two financing alternatives immediately after financing is achieved and the investment is undertaken.

 

B.Use numerical calculations to determine if the debt covenants are respected under each of the two financing alternatives. If the covenants are broken for each alternative, suggest financing options that Gomer Paper might use to finance the $70,000 investment in equipment.