ACC 100 Lecture Notes - Lecture 14: Share Capital, Retained Earnings
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The annual report for Sneer Corporation disclosed that thecompany declared and paid preferred dividends in the amount of$290,000 in the current year. It also declared and paid dividendson common stock in the amount of $1.10 per share. During thecurrent year, Sneer had 1 million common shares authorized; 490,000shares had been issued; and 271,000 shares were in treasury stock.The opening balance in Retained Earnings was $710,000 and NetIncome for the current year was $210,000. Prepare journal entries to record the declaration, and payment,of dividends on (a) preferred and (b) commonstock. (If no entry is required for a transaction/event,select "No Journal Entry Required" in the first accountfield.) 1. Record the declaration of a cash dividend of $290,000 to thepreferred stockholders. 2. Record the payment of the cash dividend to the preferredstockholders. 3. Record the declaration of a cash dividend of $1.10 per share tothe common stockholders payable on the shares outstanding. 4. Record the payment of the cash dividend to the commonstockholders. |
Problem 18-12 Various shareholders' equity topics; comprehensive[LO18-1, 18-4, 18-5, 18-6, 18-7, 18-8]
Part A |
In late 2015, the Nicklaus Corporation was formed. The corporatecharter authorizes the issuance of 5,000,000 shares of common stockcarrying a $1 par value, and 1,000,000 shares of $5 par value,noncumulative, nonparticipating preferred stock. On January 2,2016, 3,000,000 shares of the common stock are issued in exchangefor cash at an average price of $15 per share. Also on January 2,all 1,000,000 shares of preferred stock are issued at $30 pershare. |
Required: |
1. | Prepare journal entries to record these transactions.(If no entry is required for a particular transaction,select "No journal entry required" in the first accountfield.) |
2. | Prepare the shareholders' equity section of the Nicklaus balancesheet as of March 31, 2016. (Assume net income for the firstquarter 2016 was $1,500,000.) |
Part B | |
During 2016, the Nicklaus Corporation participatedin three treasury stock transactions: |
a. | On June 30, 2016, the corporation reacquires 190,000 shares forthe treasury at a price of $17 per share. |
b. | On July 31, 2016, 45,000 treasury shares are reissued at $20per share. |
c. | On September 30, 2016, 45,000 treasury shares are reissued at$15 per share. |
Required: |
1. | Prepare journal entries to record these transactions.(If no entry is required for a transaction/event, select"No journal entry required" in the first accountfield.) |
2. | Prepare the Nicklaus Corporation shareholders' equity section asit would appear in a balance sheet prepared at September 30, 2016.(Assume net income for the second and third quarter was$2,950,000.) |
Part C |
On October 1, 2016, Nicklaus Corporation receives permission toreplace its $1 par value common stock (5,000,000 shares authorized,3,000,000 shares issued, and 2,900,000 shares outstanding) with anew common stock issue having a $.50 par value. Since the new parvalue is one-half the amount of the old, this represents a 2-for-1stock split. That is, the shareholders will receive two shares ofthe $.50 par stock in exchange for each share of the $1 par stockthey own. The $1 par stock will be collected and destroyed by theissuing corporation. |
On November 1, 2016, the NicklausCorporation declares a $0.13 per share cash dividend on commonstock and a $0.30 per share cash dividend on preferred stock.Payment is scheduled for December 1, 2016, to shareholders ofrecord on November 15, 2016. |
On December 2, 2016, the NicklausCorporation declares a 1% stock dividend payable on December 28,2016, to shareholders of record on December 14. At the date ofdeclaration, the common stock was selling in the open market at $15per share. The dividend will result in 58,000 (0.01 Ã 5,800,000)additional shares being issued to shareholders. |
Required: |
Prepare journal entries to record the declaration and payment ofthese stock and cash dividends. (If no entry is requiredfor a transaction/event, select "No journal entry required" in thefirst account field.) 1.Record the entry for a 2-for-1 stock split. 2.Record declaration of cash dividend for common shares andpreferred shares. 3.Record the entry on date of record. 4.Record payment of cash dividend for common shares andpreferred shares. 5.Record declaration of common stock dividend. 6.Record distribution of common stock dividend. | |
2. | Prepare the December 31, 2016, shareholders' equity section ofthe balance sheet for the Nicklaus Corporation. (Assume net incomefor the fourth quarter was $2,450,000.) |
3. | Prepare a statement of shareholders' equity for NicklausCorporation for 2016. (Amounts to be deducted should beindicated with a minus sign. Enter your answers inthousands.) |
Part C |
On October 1, 2016, Nicklaus Corporation receives permission toreplace its $1 par value common stock (5,000,000 shares authorized,3,000,000 shares issued, and 2,900,000 shares outstanding) with anew common stock issue having a $.50 par value. Since the new parvalue is one-half the amount of the old, this represents a 2-for-1stock split. That is, the shareholders will receive two shares ofthe $.50 par stock in exchange for each share of the $1 par stockthey own. The $1 par stock will be collected and destroyed by theissuing corporation. |
On November 1, 2016, the NicklausCorporation declares a $0.13 per share cash dividend on commonstock and a $0.30 per share cash dividend on preferred stock.Payment is scheduled for December 1, 2016, to shareholders ofrecord on November 15, 2016. |
On December 2, 2016, the NicklausCorporation declares a 1% stock dividend payable on December 28,2016, to shareholders of record on December 14. At the date ofdeclaration, the common stock was selling in the open market at $15per share. The dividend will result in 58,000 (0.01 Ã 5,800,000)additional shares being issued to shareholders. |
Required: |
1. | Prepare journal entries to record the declaration and payment ofthese stock and cash dividends. (If no entry is requiredfor a transaction/event, select "No journal entry required" in thefirst account field.) |
2. | Prepare the December 31, 2016, shareholders' equity section ofthe balance sheet for the Nicklaus Corporation. (Assume net incomefor the fourth quarter was $2,450,000.) |
3. | Prepare a statement of shareholders' equity for NicklausCorporation for 2016. (Amounts to be deducted should beindicated with a minus sign. Enter your answers inthousands.) |