Common stock: These are the ordinary shares that a corporation issues to the investors in order to raise funds. In return, the investors receive a share of profit from the profits earned by the corporation in the form of dividend.
Par value: It refers to the value of a stock that is stated by the corporation’s charter. It is also known as face value of a stock.
Stated value: It refers to an amount per share, which is assigned by the board of directors to no par value stock.
Issue of common stock for non-cash assets or services: Corporations often issue common stock for the services received from attorneys or consultants as compensation, or for the purchase of non-cash assets such as land, buildings, or equipment.
This is a financial statement that shows the amount of the net income retained by a company at a particular point of time for reinvestment and pays its debts and obligations. It shows the amount of retained earnings that is not paid as dividends to the shareholders.
To Journalize: The transactions.
Answer to Problem 12.5BPR
Journalize the transactions for Corporation WYO.
Date | Account Titles and Explanation | Debit ($) | Credit ($) | |
January | 15 | No entry is required | ||
March | 1 | Cash Dividends (1) | 81,000 | |
Cash Dividends Payable | 81,000 | |||
(To record the declaration of cash dividends) | ||||
July | 10 | Cash Dividends Payable (1) | 81,000 | |
Cash | 81,000 | |||
(To record the payment of cash dividends) | ||||
May | 31 | Treasury stock
|
1,920,000 | |
Cash | 1,920,000 | |||
(To record the purchase of 60,000 shares of treasury stock) | ||||
August | 17 | Cash
|
1,520,000 | |
Treasury stock
|
1,280,000 | |||
Paid-in capital from treasury stock
|
240,000 | |||
(To record sale of treasury stock for above the cost price) | ||||
September | 1 | Cash Dividends (3) | 95,200 | |
Cash Dividends Payable | 95,200 | |||
(To record the declaration of cash dividends) | ||||
October | 1 | Stock Dividends (6) | 312,000 | |
Common Stock Dividends Distributable (7) |
234,000 | |||
Paid-in Capital in excess of par Value-Common stock (8) |
78,000 | |||
(To record the declaration of stock dividends) | ||||
October | 31 | Cash Dividends Payable (3) | 95,200 | |
Cash | 95,200 | |||
(To record the payment of cash dividends) | ||||
October | 31 | Common Stock Dividends Distributable (7) | 234,000 | |
Common Stock | 234,000 | |||
(To record the distribution of stock dividends) |
Explanation of Solution
Working note:
Compute the amount of total cash dividends declared on March 1.
Compute number of common shares outstanding after the purchase and sale of treasury stock.
Compute the amount of total cash dividends declared on September 1.
Compute the stock dividends shares.
Compute the stock dividends amount payable to common stockholders.
Compute common stock dividends distributable value.
Compute paid-in capital in excess of par value-common stock.
Note:
Stock split does not affect the accounting equation of assets, liabilities, or stockholders’ equity. It will affect only the number of shares outstanding and value per share. Hence, on January 15 no entry is passed.
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Chapter 12 Solutions
FINANCIAL & MAN. ACC. PRINC. WB W/ACCES
- Entries for selected corporate transactions Nav-Go Enterprises Inc. produces aeronautical navigation equipment. The stockholders equity accounts of Nav-Go Enterprises Inc., with balances on January 1, 20Y3, are as follows: The following selected transactions occurred during the year: Jan. 15. Paid cash dividends of 0.06 per share on the common stock. The dividend had been properly recorded when declared on December 1 of the preceding fiscal year for 34,320. Mar. 15. Sold all of the treasury stock for 6.75 per share. Apr. 13. Issued 200,000 shares of common stock for 8 per share. June 14. Declared a 3% stock dividend on common stock, to be capitalized at the market price of the stock, which is 7.50 per share. July 16. Issued the certificates for the dividend declared on June 14. Oct. 30. Purchased 50,000 shares of treasury stock for 6 per share. Dec. 30. Declared a 0.08-per-share dividend on common stock. 31. Closed the two dividends accounts to Retained Earnings. Instructions 1. Enter the January 1 balances in T accounts for the stockholders equity accounts listed. Also prepare T accounts for the following: Paid-In Capital from Sale of Treasury Stock; Stock Dividends Distributable; Stock Dividends; Cash Dividends. 2. Journalize the entries to record the transactions and post to the eight selected accounts. 3. Prepare a retained earnings statement for the year ended December 31, 20Y3. 4. Prepare the Stockholders Equity section of the December 31, 20Y3, balance sheet Using Method 1 of Exhibit 8.arrow_forwardStockholders 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_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_forward
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