Chapter 12 – Corporations: Organization, Stock Transactions, and Dividends
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DATE MODIFIED:
10/16/2017 6:21 PM
197. Journalize the following selected transactions completed during the current fiscal year:
Jan. 3
The board of directors declared a stock split that reduced the par of common shares
from $100 to $20. This action increased the number of outstanding shares to 400,000.
22
Declared a dividend of $1.75 per share on the outstanding shares of common stock.
Feb. 8
Paid the dividend declared on January 22.
Sept. 1
Declared a 5% stock dividend on the common stock outstanding (the fair market value
of the stock to be issued is $30).
Oct. 1
Issued the certificates for the common stock dividend declared on September 1.
ANSWER:
Jan. 3
No entry required
22
Cash Dividends
Cash Dividends Payable
700,000
Feb. 8
Cash Dividends Payable
Cash
700,000
Sept. 1
Stock Dividends
Stock Dividends Distributable
400,000
Paid-In Capital in Excess of
Par—Common Stock
200,000
Oct. 1
Stock Dividends Distributable
Common Stock
400,000
POINTS:
1
DIFFICULTY:
Bloom’s: Applying
Moderate
QUESTION TYPE:
Subjective Short Answer
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.12–03 – LO: 12–03
FNMN.WAJO.19.12–04 – LO: 12–04
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.20 – Accounting for Corporations
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
DATE CREATED:
7/22/2017 6:31 PM
DATE MODIFIED:
10/16/2017 6:21 PM
198. Selected transactions completed by Breezeway Construction during the current fiscal year are as follows:
February 3
Split the common stock 2-for-1 and reduced the par from $40 to $20
per share. After the split, there were 250,000 common shares
outstanding.
April 10
Declared semiannual dividends of $1.50 on 18,000 shares of preferred
stock and $0.08 on the common stock to stockholders of record on
May 10, payable on June 9.
Chapter 12 – Corporations: Organization, Stock Transactions, and Dividends
Dec.
9
Cash Dividends Payable
37,000
Cash
37,000
9
Stock Dividends Distributable
Common Stock
June 9
Paid the cash dividends.
October 10
Declared semiannual dividends of $1.50 on the preferred stock and
$0.04 on the common stock (before the stock dividend). In addition, a
2% common stock dividend was declared on the common stock
outstanding. The fair market value of the common stock is estimated
at $36.
December 9
Paid the cash dividends and issued the certificates for the common
stock dividend.
Journalize the transactions.
ANSWER:
Feb.
3
No entry required.
Apr.
10
Cash Dividends
47,000*
Cash Dividends Payable
47,000
*[(18,000 shares × $1.50) + (250,000
shares × $0.08)] = $27,000 + $20,000 = $47,000
June
9
Cash Dividends Payable
47,000
Cash
47,000
Oct.
10
Cash Dividends
37,000*
Cash Dividends Payable
37,000
*[(18,000 shares × $1.50) + (250,000
shares × $0.04)] = $27,000 + $10,000 = $37,000
10
Stock Dividends
180,000**
Stock Dividends Distributable
(5,000 × $20)
100,000
Paid-In Capital in Excess of
Par—Common Stock
80,000
**(250,000 shares × 2% × $36) = $180,000
Chapter 12 – Corporations: Organization, Stock Transactions, and Dividends
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(a)
Purchased 1,500 shares of treasury stock at $16. The treasury stock is accounted for by the
cost method. There were no previous purchases of treasury shares.
(b)
Sold 1,000 shares of treasury stock at $19.
(c)
Purchased equipment for $80,000, paying $25,000 in cash and issuing 4,000 shares of
common stock for the remaining.
(d)
Sold 500 shares of treasury stock at $14.
ANSWER:
(a)
Treasury Stock
24,000
Cash
24,000
(b)
Cash
19,000
Paid-In Capital from Sale of Treasury Stock
3,000
Treasury Stock
16,000
(c)
Equipment
80,000
Cash
25,000
Common Stock
40,000
Paid-In Capital in Excess of Par—Common
Stock
15,000
(d)
Cash
7,000
Paid-In Capital from Sale of Treasury Stock
1,000
Treasury Stock
8,000
POINTS:
1
DIFFICULTY:
Bloom’s: Applying
Moderate
QUESTION TYPE:
Subjective Short Answer
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.12–02 – LO: 12–02
FNMN.WAJO.19.12–05 – LO: 12–05
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.20 – Accounting for Corporations
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
DATE CREATED:
7/22/2017 6:31 PM
DATE MODIFIED:
10/16/2017 6:21 PM
200. On February 1, Marine Company reacquired 7,500 shares of its common stock at $30 per share. On March 15,
Marine sold 4,500 of the reacquired shares at $34 per share. On June 2, Marine sold the remaining shares at $28 per share.
ANSWER:
Feb.
1
Treasury Stock (7,500 × $30)
225,000
Cash
225,000
Mar.
15
Cash (4,500 × $34)
153,000
Treasury Stock (4,500 × $30)
135,000
Treasury Stock
[4,500 × ($34-$30)]
18,000
June
2
Cash (3,000 × $28)
84,000
Paid-In Capital from Sale of
Chapter 12 – Corporations: Organization, Stock Transactions, and Dividends
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sold 2,000 of the reacquired shares at $48 per share. On August 30, Belen sold the remaining shares at $42 per share.
Journalize the transactions of June 5, July 15, and August 30.
ANSWER:
June 5
Treasury Stock (3,300 × $45)
148,500
Cash
148,500
July 15
Cash (2,000 × $48)
96,000
Treasury Stock (2,000 × $45)
90,000
Paid-In Capital from Sale of
Treasury Stock [2,000 × ($48 – $45)]
6,000
Aug. 30
Cash (1,300 × $42)
54,600
Paid-In Capital from Sale of
Treasury Stock [1,300 × ($45 – $42)]
3,900
Treasury Stock (1,300 × $45)
58,500
POINTS:
1
DIFFICULTY:
Moderate
Bloom’s: Applying
QUESTION TYPE:
Subjective Short Answer
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.12–05 – LO: 12–05
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.20 – Accounting for Corporations
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
DATE CREATED:
7/22/2017 6:31 PM
DATE MODIFIED:
10/16/2017 6:21 PM
203. On March 4 of the current year, Barefoot Bay, Inc. reacquired 5,000 shares of its common stock at $89 per
share. On August 7, Barefoot Bay sold 3,500 of the reacquired shares at $100 per share. The remaining 1,500 shares were
sold at $88 per share on November 29.
(a)
Journalize the transaction of March 4, August 7, and November 29.
(b)
What is the balance in Paid-in Capital from Sale of Treasury Stock on December
31 of the current year?
(c)
Why might Barefoot Bay Inc. have purchased the treasury stock?
ANSWER:
(a)
Mar.
4
Treasury Stock
445,000
Cash
445,000
Aug.
7
Cash
350,000
Treasury Stock (3,500 × $89)
311,500
Paid-In Capital from Sale of
Treasury Stock
38,500
Nov.
29
Cash
132,000
Paid-In Capital from Sale of
Treasury Stock
1,500
Treasury Stock (1,500 × $89)
133,500
(b)
$37,000 credit
(c)
Barefoot Bay may have purchased the stock to support the
market price of the stock, to provide shares for resale to
employees, or for reissuance to employees as a bonus according