exercise 18-23 the balance sheet of consolidate … balance sheet of consolidate paper, inc.,...
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Exercise 18-23
The balance sheet of Consolidate Paper, Inc., included the following shareholders’ equity accounts at December 31, 2012:
Paid-in capital
Preferred stock, 8.8%, 90,000 shares at $1 par $ 90,000
Common stock, 364,000 shares at $1 par 364,000
PIC – excess of par, preferred 1,437,000
PIC – excess of par, common 2,574,000
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Retained earnings 9,735,000
Treasury stock, at cost; 4,000 common shares (44,000)
Total shareholders’ equity $14,156,000
During 2013, several events and transactions affected the retained earnings of Consolidated Paper.
Required: Prepare the appropriate entries for these events:
Exercise 18-23 (continued)
a. On March 3, the board of directors declared a property dividend of 240,000 shares of Leasco International common stock that Consolidated Paper had purchased in January as an investment (book value: $700,000). The investment shares had a fair value of $3 per share and were distributed March 31 to shareholders of record March 15.
3/3 Investment in Leasco [(240,000 x $3) - $700,000] 20,000Gain in Revaluation of Leasco 20,000
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R/E (240,000 x $3) 720,000Property Dividend Payable 720,000
3/15 No Entry
3/31 Property Dividend Payable 720,000Investment in Leasco 720,000
Exercise 18-23 (continued)
b. On May 3, a 5-for-4 stock split was declared and distributed. The stock split was effected in the form of a 25% stock dividend. The market value of the $1 par common stock was $11 per share.
This is a large “stock dividend” that should be recorded at par value, and should be based on outstanding common stock.
5/3 R/E [(25% x 360,000) x $1) 90,000
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C/S 90,000
c. On July 5, a 2% common stock dividend was declared and distributed. The market value of the common stock was $11 per share.
R/E [(360,000 + 90,000) x 2%] = (9,000 x $11) 99,000C/S (9,000 x $1) 9,000PIC – excess of par, common (9,000 x $10) 90,000
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Exercise 18-23 (continued)
d. On December 1, the board of directors declared the 8.8% cash dividend on the 90,000 preferred shares, payable on December 28 to shareholders of record December 20.
12/1 R/E (8.8% x $90,000) 7,920Preferred Dividend Payable 7,920
12/20 No Entry
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12/28 Preferred Dividend Payable 7,920Cash 7,920
Exercise 18-23 (continued)
e. On December 1, the board of directors declared a cash dividend of $0.50 per share on its common shares, payable on December 28 to shareholders of record on December 20.
12/1 R/E [(360,000 + 90,000 + 9,000) x $0.50] 229,500Dividend Payable, Common Stock 229,500
12/20 No Entry
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12/28 Dividend Payable, Common Stock 229,500Cash 229,500