Problem 18–11
A stock dividend is the distribution of additional shares of stock to current
shareholders of the corporation. The investor receives no assets, only additional
shares. Because each shareholder receives the same percentage increase in
To record the investment ($ in millions)
To record the sale of shares……………………..
10% stock dividend
There is no entry for the stock dividend, but a new investment per share
must be calculated for use later when the shares are sold:
To record the sale of shares
Note: If a financial reporting date falls between the acquisition and sale of shares,
and the investment is adjusted to fair value on that date, the treatment of the
stock dividend would be the same. That is, the new per share basis of the
investment still would be the investment balance divided by the number of
shares after the stock dividend. But the investment balance now would be its
fair value on the last reporting date rather than its cost.
Problem 18–12
Part A
Requirement 1
January 2
Cash (amount received)……………………………………………… 30,000,000
January 2
Requirement 2
NICKLAUS CORPORATION
Balance Sheet-Shareholders’ Equity Section
March 31, 2018
Shareholders’ equity
Preferred stock, $5 par, authorized 1,000,000 shares,
issued and outstanding 1,000,000 shares $ 5,000,000
Common stock, $1 par, authorized 5,000,000 shares,
Problem 18–12 (continued)
Part B
Requirement 1
June 30
July 31
September 30
Cash ($10 x 50,000 shares)………………………………………….. 500,000
Problem 18–12 (continued)
Requirement 2
NICKLAUS CORPORATION
Balance Sheet – Shareholders’ Equity Section
September 30, 2018
Shareholders’ equity
Preferred stock, $5 par, authorized 1,000,000 shares,
issued and outstanding 1,000,000 shares $ 5,000,000
Common stock, $1 par, authorized 5,000,000 shares
1 3,000,000 – 200,000 + 50,000 + 50,000
Problem 18–12 (continued)
Part C
Requirement 1
October 1
No entry
November 1
Retained earnings…………………………………………………… 540,000
November 15
No entry
December 1
Note: Dividends are not paid on treasury shares. Cash dividends are paid only
on the 5,800,000 common shares outstanding.
December 2
Retained earnings ($10 fair value x 58,000 shares2)580,000
Common stock dividends
December 28
Problem 18–12 (continued)
Requirement 2
NICKLAUS CORPORATION
Balance Sheet-Shareholders’ Equity Section
December 31, 2018
Shareholders’ equity
Preferred stock, $5 par, authorized 1,000,000 shares,
issued and outstanding 1,000,000 shares $ 5,000,000
Common stock, $.50 par, authorized 10,000,000 shares,
1 5,800,000 + 58,000
Problem 18–12 (concluded)
Requirement 3
NICKLAUS CORPORATION
Statement of Shareholders’ Equity
for the Year Ended Dec. 31, 2018
($ in 000s)
Preferred
Stock
Common
Stock
Additional
Paid-in
Capital
Retained
Earnings
Treasury
Stock
Total
Share-
holders’ Equity
Jan. 2, 2018 –– –– –– –– –– ––
Issuance of
preferred stock 5,000 15,000 20,000
Issuance of
Problem 18–13
Requirement 1
To revalue assets:
Retained earnings…………………………………………………………. 105
To eliminate a portion of the deficit against available additional
paid-in capital:
To eliminate the remainder of the deficit against common stock:
Problem 18–13 (concluded)
Requirement 2
CHAMPION CHEMICAL CORPORATION
Balance Sheet
January 1, 2019
ASSETS
Current Assets:
Cash $ 20
Receivables 40
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities $240
Stockholders’ Equity: