Calculating Stock, Dividends and Split Stock

Calculate stocks, dividends, and stock splits.

Common stock is the term used to describe the total amount paid in by stockholders for the shares they purchase (Kimmel, Weygandt, Kieso, 2011). Stockholders are the rightful owners until the stock is sold. The value of the stock is determined according to the market value that varies. Transactions regarding the stock are only recorded if the corporation is involved.

Dividends or cash dividends are the distribution of cash or other assets to stockholders (Kimmel, Weygandt, Kieso, 2011). Although the dividends reduce the amount of the retained earnings, these dividends are not an expense and do not appear on the income statement. Corporations that have just started and are new may not be paying any dividends whereas those corporation that have been in the business for year pay dividends accordingly. Dividends can take four forms: cash, property, scrip (a promissory note to pay cash), or stock (Kimmel, Weygandt, Kieso, 2011).

A stock split, like a stock dividend, involves issuance of additional shares to stockholders according to their percentage ownership. A stock split results in a reduction in the par or stated value per share (Kimmel, Weygandt, Kieso, 2011). Since the stock split will not change any of the balances on the account ledger, the total amounts reported in the balance sheet for stock holder's equity will remain the same.

Reference

Kimmel, P.D., Weygandt, J., & Kieso, D. (2011). Financial Accounting: Tools for

business decision making (7th ed.). Retrieved from The University of Phoenix eBook Collection database.