On January 1, 2017, Frederiksen Inc.’s Stockholders’ Equity category appeared as follows:
The preferred stock is noncumulative and nonparticipating. During 2017, the following transac-tions occurred:
a. On March 1, declared a cash dividend of $16,800 on preferred stock. Paid the dividend on April 1.
b. On June 1, declared a 5% stock dividend on common stock. The current market price of the common stock was $18. The stock was issued on July 1.
c. On September 1, declared a cash dividend of $0.50 per share on the common stock; paid the dividend on October 1.
d. On December 1, issued a 2-for-1 stock split of common stock when the stock was selling for $50 per share.
1. Explain each transaction’s effect on the stockholders’ equity accounts and the total stock-holders’ equity.
2. Develop the Stockholders’ Equity category of the December 31, 2017, balance sheet.Assume that the net income for the year was $650,000.
3. Write a paragraph that explains the difference between a stock dividend and a stock split.