On January 1, 2013, Davin Corporation Had $2,000,000 of Common

question 96

Essay

On January 1, 2013, Davin Corporation had $2,000,000 of common shares that were issued at $10 and retained earnings of $1,000,000. The corporation issued 100,000 common shares at $13 per share on July 1. On August 1, 2013, the company declared a $0.50 cash dividend to be paid on August 31, 2013 to shareholders of record on August 15, 2013. On December 15, the board of directors declared a 10% stock dividend to shareholders of record on December 31, 2013, payable on January 15, 2014. The market value of Davin Corporation shares was $15 per share on December 15 and $14 per share on December 31. Profit for 2013 was $500,000.
Instructions
a. Journalize the entries related to the above transactions.
b. Prepare the shareholders' equity section of the balance sheet for Davin Corporation at December 31, 2013.
c. Calculate the dividend payout ratio for 2013.

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Definitions:

Marginal Cost

The uptick in cost associated with producing an extra unit of a product or service.

Allocative Efficiency

A state of the economy in which production represents consumer preferences; in other words, every good or service is produced up to the point where the last unit provides a benefit to consumers exactly equal to the cost of producing it.

Product Mix

The total range of products that a company offers for sale, encompassing different lines, variations, and services to meet consumer needs.

Marginal Cost

The cost of producing one additional unit of a good or service, which can vary depending on the level of production.