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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Selected dividend transactions, stock split

Selected transactions completed by Canyon Ferry Boating Corporation during the current fiscal year are as follows:

Jan. 8. Split the common stock 2 for 1 and reduced the par from $80 to $40 per share. Alter the split, there were 150,000 common shares outstanding.
Apr.30. Declared semiannual dividends of $0.75 on 18,000 shares of preferred stock and S0.28 on the common stock payable on July 1.
July 1. Paid the cash dividends.
Oct. 31. Declared semiannual dividends of $0.75 on the preferred stock and $0.14 on the common stock (before the stock dividend). In addition, a 5% common stock dividend was declared on the common stock outstanding. The fair market value of the common stock is estimated at $52.
Dec. 31. Paid the cash dividends and issued the certificates for the common stock dividend.

Journalize the transactions.

To determine

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.

Cash dividends: The amount of cash provided by a corporation out of its distributable profits to its shareholders as a return for the amount invested by them is referred as cash dividends.

Stock Dividends: It refers to the payment of dividends by a company to its existing shareholders, in the form of additional shares rather than cash. Stock dividends are paid, when there is inadequate cash availability in the company.

To Journalize: The transactions.

Explanation

Journalize the transactions for Corporation CF.

Date Account Titles and Explanation Debit ($) Credit ($)
January 8 No entry is required
April 30 Cash Dividends                                        (1) 55,500
     Cash Dividends Payable 55,500
(To record the declaration of cash dividends)
July 1 Cash Dividends Payable                          (1) 55,500
     Cash 55,500
(To record the payment of cash dividends)
October 31 Cash Dividends                                        (2) 34,500
     Cash Dividends Payable 34,500
(To record the declaration of cash dividends)
October 31 Stock Dividends                                       (4) 390,000

    Common Stock Dividends Distributable                         

(5)

300,000

    Paid-in Capital in excess of Stated

    Value-Common stock                          (6)

90,000
(To record the declaration of stock dividends)
December 31 Cash Dividends payable                          (2) 34,500
     Cash 34,500
(To record the payment of cash dividends)
December 31 Common Stock Dividends Distributable (5) 300,000
    Common Stock 300,000
(To record the distribution of stock dividends)

Table (1)

Working note:

Compute the amount of total cash dividends declared on April 30.

Amount of total cash dividendsdeclared on April 30} =[Cash divided for preferrence shares +Cash divided for common shares +]=[(Number of preferrence shares×$0.75per share)+(Number of shares outstandingafter the the stock split×$0.28 per share)]=[(18,000 shares×$0.75)+(150,000×$0.28)]=$55,500 (1)

Compute the amount of total cash dividends declared on October 31.

Amount of total cash dividendsdeclared on October 31} =[Cash divided for preferrence shares +Cash divided for common shares +]=[(Number of preferrence shares×$0

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