Professional Documents
Culture Documents
300,000
3. Cash................................................................................................
Preferred Stock....................................................................
Paid-in Capital in Excess of ParPreferred Stock...............
550,000
4. Organization Expense.....................................................................
Common Stock....................................................................
Paid-in Capital in Excess of Stated Value............................
6,000
80,000
220,000
500,000
50,000
1,000
5,000
Treasury Stock...................................................................................
Cash..........................................................................................
21,700
Cash...................................................................................................
Retained Earnings..............................................................................
Treasury Stock..........................................................................
6,000
200
21,700
6,200
(c)
Cash...................................................................................................
Paid-in Capital from Treasury Stock..........................................
Treasury Stock..........................................................................
3,400
300
3,100
20,000 shares of authorized and unissued common stock were sold for $8 per share.
2. Jan. 16
Declared a cash dividend of 20 cents per share, payable February 15 to stock-holders of record
on February 5.
3. Feb. 10
30,000 shares of authorized and unissued common stock were sold for $12 per share.
4. March 1
A 30% stock dividend was declared and issued. Fair value per share is currently $15.
5. April 1
A two-for-one split was carried out. The par value of the stock was to be reduced to $2.50 per
share. Fair value on March 31 was $18 per share.
6. July 1
A 15% stock dividend was declared and issued. Fair value is currently $10 per share.
7. Aug. 1
A cash dividend of 20 cents per share was declared, payable September 1 to stockholders of
record on August 21.
Instructions
Enter the above events into the following work sheet showing how each event affects the column. Event No. 1
will serve as an example.
Common Stock
No. of
Total
Item
Shares Issued
Par Value
Beginning Balance1/1/13
400,000
$2,000,000
Event #1Jan. 5
20,000
100,000
Balance
420,000
$2,100,000
Event # 2Jan. 16 (and events 3 through 7)
Paid-in Capital In
Excess of Par Retained Earnings
$850,000
$3,000,000
60,000
-0$910,000
$3,000,000
Solution 15-144
Event #2Jan. 16
-0-0-0(84,000)
Balance
420,000
$2,100,000
$910,000
$2,916,000
#3Feb. 10
30,000
150,000
210,000
-0
Balance
450,000
$2,250,000
$1,120,000
$2,916,000
#4March 1
135,000
675,000
-0(675,000)
Balance
585,000
$2,925,000
$1,120,000
$2,241,000
#5April 1
585,000
-0-0-0
Balance
1,170,000
$2,925,000
$1,120,000
$2,241,000
#6July 1
175,500
438,750
1,316,250
(1,755,000)
Balance
1,345,500
$3,363,750
$2,436,250
$486,000
#7Aug. 1
-0-0-0(257,140)
Balance
1,345,500
$3,363,750
$2,436,250
$216,900
300,000
400,000
110,000
810,000
440,000
$1,250,000
Instructions
(a) Record the following transactions which occurred consecutively (show all calculations).
1. A total cash dividend of $90,000 was declared and payable to stockholders of record. Record dividends
payable on common and preferred stock in separate accounts.
2. A 15% common stock dividend was declared. The average fair value of the common stock is $18 a
share.
3. Assume that net income for the year was $120,000 (record the closing entry) and the board of directors
appropriated $70,000 of retained earnings for plant expansion.
(b) Construct the stockholders' equity section incorporating all the above information.
Solution 15-145
(a) 1. Retained Earnings..................................................................
Dividends PayablePreferred ($300,000 .05)..........
Dividends PayableCommon......................................
90,000
15,000
75,000
2.
40,000 shares
15%
6,000 shares as stock dividend
$18
$108,000 total dividend
Retained Earnings..................................................................
Common Stock Dividend Distributable........................
Paid-in Capital in Excess of Par..................................
108,000
3. Income Summary....................................................................
Retained Earnings.......................................................
120,000
Retained Earnings..................................................................
Retained Earnings Appropriated for Plant Expansion.
70,000
60,000
48,000
120,000
70,000
$ 300,000
400,000
60,000
158,000
918,000
362,000
$1,280,000
Preferred
$ 48,000
$ 48,000
(b)
Dividends in arrears, 6% of $800,000 for two years
Current year's dividend
Remainder to common
Preferred
$96,000
48,000
Common
$
348,000
$348,000
Common
$
252,000
Total
$ 48,000
348,000
$396,000
Total
$96,000
48,000
252,000
$144,000
$252,000
$396,000
Preferred
$96,000
48,000
72,000
$216,000
Common
$
72,000
108,000
$180,000
Total
$96,000
120,000
180,000
$396,000
Preferred
$96,000
48,000
32,000
$176,000
Common
$
72,000
48,000
100,000
$220,000
Total
$96,000
120,000
80,000
100,000
$396,000
(c)
(d)