Following is the shareholders' equity section of Morgan Supplies on a day its common stock is trading at $77 per share.
Required:
a. Use the financial statement template below to show the financial statement effects of
the following dividend events. (Assume that the events are independent.)
(1) Cash dividend declaration and payment of $1 per share
(2) Property dividend declaration and payment of shares representing a short-term
investment in Screen Products, Ltd., with a fair value of $15,000
(3) 10 percent stock dividend
(4) 100 percent stock dividend
(5) 3-for-1 stock split
(6) 1-for-2 reverse stock split
Journal entry (optional):
b. Which events changed the book value of common equity?
c. Under what conditions will these events lead to future increases and decreases in ROE?
Correct Answer:
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(b) Journal entries
(3) Retained...
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