Concept explainers
1.
Prepare
1.
Explanation of Solution
Prepare journal entry to record the given transactions:
Date | Account Titles and explanation | Debit ($) | Credit ($) |
January 4, 2016 | Dividend payable: Preferred | 6,000 | |
Dividend payable: Common (1) | 46,400 | ||
Cash | 52,400 | ||
(To record declaration of preferred and common stock) | |||
January 5, 2016 | Cash | 55,000 | |
Preferred stock, $100 par | 50,000 | ||
Additional paid-in capital on preferred stock | 5,000 | ||
( To record issuance of preferred stock) | |||
January 22, 2016 | Cash | 92,000 | |
Common stock, $5 par | 20,000 | ||
Additional paid-in capital on common stock | 72,000 | ||
( To record issuance of common stock) | |||
April 2, 2016 | Cash | 16,800 | |
| 14,000 | ||
Additional paid-in capital on treasury stock | 2,800 | ||
(To record the reissuance of treasury stock) | |||
May 14, 2016 | Retained earnings (2) | 84,250 | |
Common stock to be distributed | 16,850 | ||
Additional paid-in capital from stock dividend | 67,400 | ||
(To record declaration of stock dividend) | |||
June 4, 2016 | Retained earnings | 7,500 | |
Dividends payable: Preferred (3) | 7,500 | ||
(To record the declaration of annual per share dividend to the preferred) | |||
August 29, 2016 | Common stock to be distributed | 16,850 | |
Common stock, $5 par | 16,850 | ||
(To record the issuance of stock dividend) | |||
July 5, 2016 | Dividends payable: Preferred stock | 7,500 | |
Cash | 7,500 | ||
(To record the amount of dividend paid on preferred stock) | |||
July 20, 2016 | No entry is required | ||
August 3, 2016 | Loss on disposal of investment | 25,000 | |
Unrealized decrease in the value of available-for-sale of securities | 15,000 | ||
Allowance for change in value investment | 10,000 | ||
(To record the declaration of property dividend) | |||
Retained earnings | 20,000 | ||
Property dividend payable | 20,000 | ||
(To record the current value of the bond) | |||
September 1, 2016 | Property dividend payable | 20,000 | |
Allowance for change in value of investment | 25,000 | ||
Investment in Company A stock | 45,000 | ||
(To record the issuance of property dividend) | |||
December 3, 2016 | Retained earnings | 74,226 | |
Dividends payable: Preferred (3) | 7,500 | ||
Dividends payable: Common (4) | 66,726 | ||
(To record the declaration of annual per share dividend to the preferred and common stock) |
Table (1)
Note:
Note 1: On July 20 memorandum entry is made as the common stock split two for one and the par value is reduced from $5 to $2.50.
Note 2: On July 20 memorandum entry is made when number of shares issued on common stock increases from 37,370
Working note (1): Calculate the amount of dividend payable to the common stock:
Working note (2): Calculate the amount of retained earnings:
Particulars | Amount in $ |
Shares issued | 34,000 |
Less: Treasury shares | 300 |
Shares outstanding | 33,700 |
Multiply: Stock dividend | 10% |
Shares in stock dividend | 3,370 |
Multiply: Current market price | $25 |
Reduction in retained earnings | 84,250 |
Table (2)
Working note (3): Calculate the amount of dividend payable to the preferred stock:
Working note (4): Calculate the amount of dividend payable to the common stock:
2.
Prepare Company J’s statement of stockholder’s equity section for 2016.
2.
Explanation of Solution
Prepare Company J’s statement of stockholder’s equity section for 2016.
Company J | |
Shareholder's equity | |
For the year ended December 31, 2016 | |
Particulars | Amount in $ |
Contributed Capital: | |
Preferred stock (6%, $100 par, 2,500 shares issued and outstanding) | 250,000 |
Additional paid-in capital on preferred stock | 17,000 |
Common stock ($2.50 par, 74,740 shares issued of which 600 are in the corporate treasury) | 186,850 |
Additional paid-in capital on common stock | 312,000 |
Additional paid-in capital from treasury stock | 2,800 |
Additional paid-in capital from stock dividend | 67,400 |
Total contributed capital | 836,050 |
Retained earnings (restricted in the amount of $6,000, the cost of the treasury shares) (5) | 711,024 |
Accumulated other comprehensive income (loss): | |
Unrealized decrease in value of available-for-sale securities | (26,000) |
Total contributed capital, retained earnings, and accumulated other comprehensive income | 1,521,074 |
Less: Treasury stock (600 shares of common at $10 per share) | (6,000) |
Total Shareholders’ Equity | 1,515,074 |
(Table 3)
Working note (5): Calculate the amount of retained earnings:
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Chapter 16 Solutions
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