Concept explainers
(a)
Stock Dividends: It refers to the payment of the dividend to its shareholders by the corporation in the form of shares rather than cash is referred as stock dividend.
To
(a)
Answer to Problem 12.10EX
Record the declaration and issuance of stock dividends.
Transaction Number | Account Titles and Explanation | Debit ($) | Credit ($) |
1 | Stock Dividends (2) | 1,980,000 | |
Common Stock Dividends (3) |
1,650,000 | ||
Paid-in Capital in excess of Par Value-Common stock (4) |
330,000 | ||
(To record the declaration of stock dividends) | |||
2 | Stock Dividends Distributable (3) | 1,650,000 | |
Common Stock | 1,650,000 | ||
(To record the distribution of stock dividends) |
Table (1)
Compute the number of stock dividends shares declared.
Compute the stock dividends amount payable to common stockholders.
Compute stock dividends distributable value.
Compute paid-in capital in excess of par value-common stock.
Explanation of Solution
Transaction 1: Declared 5% of stock dividends.
- Stock Dividends is a contra-stockholders’ equity account which decreases the stockholders’ equity amount. Therefore, debit Stock Dividends account with $1,980,000.
- Common Stock Dividends Distributable is a stockholders’ equity account and the amount has increased due to the declaration of stock dividends. Therefore, credit Common Stock Dividends Distributable account with $1,650,000.
- Paid-in Capital in Excess of Par Value is a stockholders’ equity account and the amount has increased due to increase in capital excess of common stock value. Therefore, credit Paid-in Capital in Excess of Par Value account with $330,000.
Transaction 2: Distribution of stock dividends declared.
- Common Stock Dividends Distributable is a stockholders’ equity account and the amount has decreased due to transfer of Common Stock Dividends Distributable amount to Common Stock account. Therefore, debit Common Stock Dividends Distributable account with $1,650,000.
- Common Stock is stockholders’ equity account and the amount has increased. Therefore, credit Common Stock account with $1,650,000.
(b)
(1) Total paid-in capital, (2) total retained earnings, and (3) total stockholders’ equity amount before the declaration of the stock dividends.
(b)
Explanation of Solution
(1)
Determine total paid-in capital amount before the declaration of the stock dividends.
Hence, the total paid-in capital amount before the declaration of the stock dividends is $42,000,000.
(2)
Determine total retained earnings amount before the declaration of the stock dividends.
It is given that HL Company’s retained earnings before the declaration of the stock dividends is $89,550,000.
Hence, the total retained earnings amount before the declaration of the stock dividends is $89,550,000.
(3)
Determine total stockholders’ equity amount before the declaration of the stock dividends.
Hence, the total stockholders’ equityamount before the declaration of the stock dividends is $131,550,000.
(c)
(1) Total paid-in capital, (2) total retained earnings, and (3) total stockholders’ equity amount after the declaration of the stock dividends.
(c)
Explanation of Solution
(1)
Determine total paid-in capital amount after the declaration of the stock dividends.
Hence, the total paid-in capital amount after the declaration of the stock dividends is $43,980,000.
(2)
Determine total retained earnings amount after the declaration of the stock dividends.
Hence, the total retained earnings amount after the declaration of the stock dividends is $87,570,000.
(3)
Determine total stockholders’ equity amount after the declaration of the stock dividends.
Hence, the total stockholders’ equityamount after the declaration of the stock dividends is $131,550,000.
Want to see more full solutions like this?
Chapter 12 Solutions
Financial & Managerial Accounting
- The following selected accounts appear in the ledger of EJ Construction Inc. at the beginning of the current fiscal year: During the year, the corporation completed a number of transactions affecting the stockholders equity. They are summarized as follows: a. Issued 500,000 shares of common stock at 8, receiving cash. b. Issued 10,000 shares of preferred 1% stock at 60. c. Purchased 50,000 shares of treasury common for 7 per share. d. Sold 20,000 shares of treasury common for 9 per share. e. Sold 5,000 shares of treasury common for 6 per share. f. Declared cash dividends of 0.50 per share on preferred stock and 0.08 per share on common stock. g. Paid the cash dividends. Instructions Journalize the entries to record the transactions. Identify each entry by letter.arrow_forwardThe income statement, statement of retained earnings, and balance sheet for Somerville Company are as follows: Includes both state and federal taxes. Brief Exercise 15-20 Calculating the Average Common Stockholders Equity and the Return on Stockholders Equity Refer to the information for Somerville Company on the previous pages. Required: Note: Round answers to four decimal places. 1. Calculate the average common stockholders equity. 2. Calculate the return on stockholders equity.arrow_forwardSelected stock transactions The following selected accounts appear in the ledger of Parks Construction Inc. at the beginning of the current year: During the year, the corporation completed a number of transactions affecting the stockholders equity. They are summarized as follows: a. Issued 200,000 shares of common stock at 12, receiving cash. b. Issued 8,000 shares of preferred 2% stock at 115. c. Purchased 175,000 shares of treasury common for 10 per share. d. Sold 110,000 shares of treasury common for 14 per share. e. Sold 30,000 shares of treasury common for 8 per share. f. Declared cash dividends of 1.25 per share on preferred stock and 0.08 per share on common stock. g. Paid the cash dividends. Instructions Journalize the entries to record the transactions. Identify each entry by letter.arrow_forward
- Given the following year-end information for Somerset Corporation, compute its basic earnings per share. Net income, 13,000 Preferred dividends declared, 4,000 Weighted average common shares for the year, 4,500arrow_forwardLongmont Corporation earned net income of $90,000 this year. The company began the year with 600 shares of common stock and issued 500 more on April 1. They issued $5,000 in preferred dividends for the year. What is the numerator of the EPS calculation for Longmont?arrow_forwardJupiter Corporation earned net income of $90,000 this year. The company began the year with 600 shares of common stock and issued 500 more on April 1. They issued $5,000 in preferred dividends for the year. What is Jupiter Corporations weighted average number of shares for the year?arrow_forward
- Stockholders equity accounts and other related accounts of Gonzales Company as of January 1, 20--, the beginning of its fiscal year, are shown below. (a)Received 20,000 for the balance due on subscriptions for preferred stock with a par value of 40,000 and issued the stock. (b)Purchased 10,000 shares of common treasury stock for 18 per share. (c)Received subscriptions for 10,000 shares of common stock at 19 per share, collecting down payments of 45,000. (d)Issued 15,000 shares of common stock in exchange for land with a fair market value of 290,000. (e)Sold 5,000 shares of common treasury stock for Si00,000. (f)Issued 10,000 shares of preferred stock at 11.50 per share, receiving cash. (g)Sold 3,000 shares of common treasury stock for 17 per share. REQUIRED 1. Prepare general journal entries for the transactions, identifying each transaction by letter. 2. Post the journal entries to appropriate T accounts. The cash account has a beginning balance of 300,000. 3. Prepare the stockholders equity section of the balance sheet as of December 31, 20--. Net income for the year was 825,000 and dividends of 400,000 were paid.arrow_forwardStockholders' Equity section of balance sheet The following accounts and their balances appear in the ledger of Goodale Properties Inc. on June 30 of the current year: Prepare the Stockholders Equity section of the balance sheet as of June 30. Eighty thousand shares of common stock are authorized, and 9,000 shares have been reacquired.arrow_forwardBrunleigh Corporation earned net income of $200,000 this year. The company began the year with 10,000 shares of common stock and issued 5,000 more on April 1. They issued $7,500 in preferred dividends for the year. What is Brunleigh Corporations weighted average number of shares for the year?arrow_forward
- Nutritious Pet Food Companys board of directors declares a cash dividend of $1.00 per common share on November 12. On this date, the company has issued 12,000 shares but 2,000 shares are held as treasury shares. What is the journal entry to record the declaration of this dividend?arrow_forwardOutstanding Stock Lars Corporation shows the following information in the stockholders equity section of its balance sheet: The par value of common stock is S5, and the total balance in the Common Stock account is $225,000. There are 13,000 shares of treasury stock. Required: What is the number of shares outstanding? Use the following information for Exercises 10-58 and 10-59: Stahl Company was incorporated as a new business on January 1, 2019. The company is authorized to issue 600,000 shares of $2 par value common stock and 80,000 shares of 6%, S20 par value, cumulative preferred stock. On January 1, 2019, the company issued 75,000 shares of common stock for $15 per share and 5,000 shares of preferred stock for $25 per share. Net income for the year ended December 31, 2019, was $500,000.arrow_forwardChen Corporation began 2012 with the following stockholders equity balances: The following selected transactions and events occurred during the year: a. Issued 10,000 shares of common stock for 60,000. b. Purchased 1,200 shares of treasury stock for 4,800. c. Sold 2,000 shares of treasury stock for 11,000. d. Generated net income of 94,000. e. Declared and paid the full years dividend on preferred stock and a dividend of 1.00 per share on common stock outstanding at the end of the year. Chen Corporation maintains several paid-in capital accounts (Paid-in Capital in Excess of Par, Paid-in Capital from Treasury Stock, etc.) in its ledger, but combines them all as Additional paid-in capital when preparing financial statements.arrow_forward
- Excel Applications for Accounting PrinciplesAccountingISBN:9781111581565Author:Gaylord N. SmithPublisher:Cengage LearningCornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage LearningManagerial Accounting: The Cornerstone of Busines...AccountingISBN:9781337115773Author:Maryanne M. Mowen, Don R. Hansen, Dan L. HeitgerPublisher:Cengage Learning
- Financial And Managerial AccountingAccountingISBN:9781337902663Author:WARREN, Carl S.Publisher:Cengage Learning,Financial AccountingAccountingISBN:9781337272124Author:Carl Warren, James M. Reeve, Jonathan DuchacPublisher:Cengage Learning