Chapter 12 – Corporations: Organization, Stock Transactions, and Dividends
188. Sabas Company has 40,000 shares of $100 par, 1% preferred stock and 100,000 shares of $50 par common stock
issued and outstanding. The following amounts were distributed as dividends:
Year 1:
$ 50,000
Year 2:
90,000
Year 3:
130,000
Determine the dividends per share for preferred and common stock for each year.
Amount distributed
$130,000
Preferred dividend (40,000 shares)
40,000
Dividends per share:
189. Indicate whether the following actions would (+) increase, (–) decrease, or (0) not affect a company’s total assets,
liabilities, and stockholders’ equity.
Stockholders’
Assets
Liabilities
Equity
(a)
Declaring a cash dividend
_______
_______
_______
(b)
Paying the cash dividend declared in (a)
_______
_______
_______
(c)
Declaring a stock dividend
_______
_______
_______
(d)
Issuing stock certificates for the stock
dividend declared in (c)
_______
_______
_______
(a)
Declaring a cash dividend
(c)
Declaring a stock dividend
dividend declared in (c)
Chapter 12 – Corporations: Organization, Stock Transactions, and Dividends
190. The following account balances appear on the balance sheet of Osgood Industries:
Common Stock (300,000 shares authorized, $100 par): $10,000,000
Paid-In Capital in Excess of Par—Common Stock: $2,000,000
Retained Earnings: $45,000,000
The board of directors declared a 2% stock dividend when the market price of the stock was $135 a share.
Required:
(1)
Journalize the entries to record
(a)
the declaration of the dividend, capitalizing an amount equal to market value
(b)
the issuance of the stock certificates
(2)
Determine the following amounts before the stock dividend was declared:
(a)
Total paid-in capital
(b)
Total retained earnings
(c)
Total stockholders’ equity
(3)
Determine the following amounts after the stock dividend was declared and closing
entries were recorded at the end of the year:
(a)
Total paid-in capital
(b)
Total retained earnings
(c)
Total stockholders’ equity
(1)
(a)
Stock Dividends
270,000
*Stock Dividends Distributable
(2,000 × $100)
Paid-In Capital in Excess of Par—
*[($10,000,000/$100) × $135]× 2%
(b)
Stock Dividends Distributable
200,000
Common Stock
(2)
(a)
$12,000,000 ($10,000,000 + $2,000,000)
(b)
$45,000,000
(c)
$57,000,000 ($12,000,000 + $45,000,000)
(3)
(a)
$12,270,000 ($12,000,000 + $270,000)
(b)
$44,730,000 ($45,000,000 – $270,000)
(c)
$57,000,000 ($12,270,000 + $44,730,000)
Chapter 12 – Corporations: Organization, Stock Transactions, and Dividends
191. Macy Company has 10,000 shares of 2% cumulative preferred stock of $50 par and 25,000 shares of $75 par
common stock. The following amounts were distributed as dividends:
Year 1:
$30,000
Year 2:
6,000
Year 3:
80,000
Determine the dividends per share for preferred and common stock for each year.
192. Solar Company has 600,000 shares of $75 par common stock outstanding. On February 13, Solar declared a 3%
stock dividend to be issued on April 30 to stockholders of record on March 14. The market price of the stock was $90 per
share on February 13.
Journalize the entries required on February 13, March 14, and April 30.
Chapter 12 – Corporations: Organization, Stock Transactions, and Dividends
193. The following transactions took place for the XYZ Corporation:
November 12 – Declared a total cash dividend of $45,000 for stockholders of record November 20 payable on December
1. Record the journal entries required by these events.
Briefly describe the significance of November 20.
194. Sabas Company has 20,000 shares of $100 par, 1% noncumulative preferred stock and 100,000 shares of $50 par
common stock. The following amounts were distributed as dividends:
Year 1:
$10,000
Year 2:
15,000
Year 3:
90,000
Determine the dividends per share for preferred and common stock for each year.
Chapter 12 – Corporations: Organization, Stock Transactions, and Dividends
195. On January 1, Year 1, a company had the following transactions:
– Issued 10,000 shares of $2.00 par common stock for $12.00 per share.
– Issued 3,000 shares of $50 par, 6% cumulative preferred stock for $70 per share.
– Purchased 1,000 shares of previously issued common stock for $15.00 per share.
– No other shares of stock were issued or outstanding.
The company had the following dividend information available:
Year 1 – No dividend paid
Year 2 – Paid a $2,000 total dividend
Year 3 – Paid a $20,000 total dividend
Year 4 – Paid a $25,000 total dividend
Using the following format, fill in the correct values for each year:
Year 1
Year 2
Year 3
Year 4
Common stock dividend
Preferred stock dividend
Dividends in arrears
Dividends in arrears
$ 5,000
LEARNING OBJECTIVES:
196. Journalize the following selected transactions completed during the current fiscal year:
Mar. 4
The board of directors of New Town, Inc. declared a stock split that reduced the par of
common shares from $100 to $20. This action increased the number of outstanding
shares to 500,000.
26
Declared a dividend of $1.75 per share on the outstanding shares of common stock.
Apr. 5
Paid the dividend declared on March 26.
Nov. 1
Declared a 5% stock dividend on the common stock outstanding (the fair market value
of the stock to be issued is $25).
Dec. 1
Issued the certificates for the common stock dividend declared on November 1.
Chapter 12 – Corporations: Organization, Stock Transactions, and Dividends
Mar. 4
Cash Dividends
Apr. 5
Cash Dividends Payable
Nov. 1
Stock Dividends
Stock Dividends Distributable
197. Prepare entries to record the following selected transactions completed during the current fiscal year:
Feb. 1
The board of directors declared a stock split which reduced the par of common shares
from $100 to $20. This action increased the number of outstanding shares to 500,000.
11
Purchased 25,000 shares of the company’s own stock at $44, recording the treasury
stock at cost.
May 1
Declared a dividend of $2.50 per share on the outstanding shares of common stock.
15
Paid the dividend declared on May 1.
Oct. 19
Declared a 2% stock dividend on the common stock outstanding (the fair market value
of the stock to be issued is $55).
Nov. 12
Issued the certificates for the common stock dividend declared on October 19.
Treasury Stock
May 1
Cash Dividends
Chapter 12 – Corporations: Organization, Stock Transactions, and Dividends
198. 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.
Cash Dividends
Cash Dividends Payable
Sept. 1
Stock Dividends
Paid-In Capital in Excess of
Par—Common Stock
Stock Dividends Distributable
Oct. 19
Stock Dividends
Nov. 12
Stock Dividends Distributable
Chapter 12 – Corporations: Organization, Stock Transactions, and Dividends
199. 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.
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.
No entry required.
Cash Dividends
Cash Dividends Payable
Cash Dividends Payable
Stock Dividends
Cash Dividends Payable
Stock Dividends Distributable
Chapter 12 – Corporations: Organization, Stock Transactions, and Dividends
200. A company has 10,000 shares of $10 par common stock outstanding. Prepare entries to record the following:
(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.
Treasury Stock
Cash
Equipment
Stock
Cash
Paid-In Capital from Sale of Treasury Stock
201. 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.
Journalize the transaction of February 1, March 15, and June 2.
Feb.
Treasury Stock (7,500 × $30)
Cash
Mar.
Cash (4,500 × $34)
[4,500 × ($34-$30)]
June
Cash (3,000 × $28)
Treasury Stock (3,000 × $30)
Chapter 12 – Corporations: Organization, Stock Transactions, and Dividends
202. On April 2 a corporation purchased for cash 5,000 shares of its own $10 par common stock at $16 a share. It sold
3,000 of the treasury shares at $19 a share on June 10. The remaining 2,000 shares were sold on November 10 for $12 a
share.
(a)
Journalize the entries to record the purchase (treasury stock is recorded at cost).
(b)
Journalize the entries to record the sale of the stock.
Treasury Stock(5,000 × $16)
Cash (3,000 × $19)
November 10
Cash (2,000 × $12)
203. On June 5, Belen Corporation reacquired 3,300 shares of its own common stock at $45 per share. On July 15, Belen
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.
June 5
Treasury Stock (3,300 × $45)
July 15
Cash (2,000 × $48)
Aug. 30
Cash (1,300 × $42)
Chapter 12 – Corporations: Organization, Stock Transactions, and Dividends
204. 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?
(a)
Mar.
Treasury Stock
445,000
Aug.
Cash
311,500
Nov.
Cash
Paid-In Capital from Sale of
133,500
(b)
$37,000 credit
205. At December 31, Idaho Company had the following ending account balances:
Retained Earnings: $250,000
Preferred Stock ($100 par, 7% cumulative, 10,000 authorized, 5,000 issued and outstanding): $500,000
Treasury Stock: $40,000
Paid-In Capital in Excess of Par—Common Stock: $625,000
Paid-In Capital in Excess of Par—Preferred Stock: $50,000
Common Stock ($5 par value, 500,000 shares authorized, 105,000 issued): $525,000
Prepare the stockholders’ equity section of the balance sheet in good form with all of the required disclosures.
Chapter 12 – Corporations: Organization, Stock Transactions, and Dividends
Chapter 12 – Corporations: Organization, Stock Transactions, and Dividends
206. Using the following accounts and balances, prepare the stockholders’ equity section of the balance sheet. Fifty
thousand shares of common stock are authorized, and 5,000 shares have been reacquired.
Common Stock, $50 par
$1,250,000
Paid-In Capital in Excess of Par
800,000
Paid-In Capital from Sale of Treasury Stock
42,000
Retained Earnings
4,350,000
Treasury Stock
155,000
issued)
Chapter 12 – Corporations: Organization, Stock Transactions, and Dividends
207. Big Bluestem Inc. reported the following results for the year ending April 30:
Retained earnings, May 1
$3,750,000
Net income
720,000
Cash dividends declared
80,000
Stock dividends declared
220,000
Prepare a retained earnings statement for the fiscal year ended April 30.
208. Using the following information, prepare the stockholders’ equity section of the balance sheet. Seventy thousand
shares of common stock are authorized and 7,000 shares have been reacquired.
Common Stock, $75 par
$4,725,000
Paid-In Capital in Excess of Par
679,000
Paid-In Capital from Sale of Treasury Stock
25,200
Retained Earnings
2,032,800
Treasury Stock
600,000
Chapter 12 – Corporations: Organization, Stock Transactions, and Dividends
209. Firefly, Inc. reported the following results for the year ending July 31:
Retained earnings, August 1
$875,000
Net income
450,000
Cash dividends declared
140,000
Stock dividends declared
60,000
Prepare a retained earnings statement for the fiscal year ended July 31.
Chapter 12 – Corporations: Organization, Stock Transactions, and Dividends
210. The Torre Company has the following stockholders’ equity account balances in stockholders equity on December 31.
Common Stock – $5 par, 60,000 shares issued
$300,000
Paid-In Capital in Excess of Par—Common Stock
600,000
Preferred Stock – $100 par, 5,000 shares issued
500,000
Paid-In Capital in Excess of Par—Preferred
100,000
Retained Earnings
200,000
Treasury Stock (cost – $12 per share)
60,000
Answer the following questions:
1. How many shares of treasury stock are owned?
2. What was the average market price per share at which common stock was issued?
3. What was the average market price per share at which preferred stock was issued?
4. What is the total value of the paid-in capital portion of stockholders’ equity?
5. What is the total value of stockholders’ equity?
6. How many shares of common stock are outstanding?
7. If net income for the year was $75,000 and a preferred stock dividend of $20,000 was paid,
what was the beginning value of retained earnings? How much is earnings per share for
the year?
Chapter 12 – Corporations: Organization, Stock Transactions, and Dividends
211. Marcos Company, which had 35,000 shares of common stock outstanding, declared a 4-for-1 stock split.
(a)
What will be the number of shares outstanding after the split?
(b)
If the common stock had a market price of $280 per share before the stock
split, what would be an approximate market price per share after the split?
212. A corporation, which had 18,000 shares of common stock outstanding, declared a 3-for-1 stock split.
(a)
What will be the number of shares outstanding after the split?
(b)
If the common stock had a market price of $240 per share before the stock split, what
would be an approximate market price per share after the split?
(c)
Journalize the entry to record the stock split.
outstanding × Ratio of stock split = 18,000 shares × 3 = 54,000
(c)
213. A company had the following stockholders’ equity information available at year-end.
– Issued 11,000 shares of $2.00 par value common stock for $12.00 per share.
– Issued 5,000 shares of $50 par value 6% preferred stock for $70 per share.
– Purchased 1,000 shares of previously issued common stock for $15.00 per share.
– Reported net income of $200,000.
– Declared and paid the preferred stock dividend.
Calculate the earnings per share for the current year.
($200,000 – $15,000)/10,000 common shares = $18.50 EPS