Question

Kosmier Company has outstanding 500,000 shares of $50 par value common stock that originally sold for $60 per share. During the three most recent years, the company carried out the following activities in the order presented: declared and distributed a 10 percent stock dividend, declared and paid a cash dividend of $1 per share, declared and distributed a 2-for-1 stock split, and declared and paid a $0.60 per share cash dividend.

Determine the amount of cash that the company paid in the four transactions described above. (Omit the "$" sign in your response.) Assume If you were a stockholder who held 100 shares of stock that you purchased four years ago when the market value of the shares was $65, how many shares would you own after the four transactions described above?

Answer 1

Determine the amount of cash that the company paid in the four transactions described above.

• total cash paid as dividends = $550,000 + $660,000 = $1,210,000

Assume If you were a stockholder who held 100 shares of stock that you purchased four years ago when the market value of the shares was $65, how many shares would you own after the four transactions described above?

• 220 stocks

Step-by-step explanation:

The company distributed 500,000 x 10% = 550,000 stocks resulting from the on the first stock dividend distribution.

Then it distributed 550,000 x $1 = $550,000 on the following cash dividend.

When the company declared a stock split, it resulted in 550,000 x 2 = 1,100,000 stocks outstanding.

Then it distributed 1,100,000 x $0.60 = $660,000 on the following cash dividend.

100 stocks 4 years ago:

100 x 1.1 (10% stock dividend) = 110 stocks

110 x 2 = 220 (stock split)