On December 31, 2016, the shareholders’ equity section of the of R & L reflected the following:
Common shares (no-par value; authorized 60,000 shares; outstanding
25,000 shares)……………………………………………………………………………………………..$250,000
Contributed surplus…………………………………………………………………………………………12,000
Retained earnings……………………………………………………………………………………………75,000
On February 1, 2017, the board of directors declared a 12 percent stock to be issued April 30, 2017. The market value of the shares on February 1, 2017, was $18 per share.
Required:
1. For comparative purposes, prepare the shareholders’ equity section of the balance sheet
(a) immediately before the stock and (b) immediately after the stock TIP: Use two columns for the amounts in this requirement.
2. Explain the effects of this stock on the assets, the liabilities, and the components of shareholders’ equity.
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