On January 1, 2012, Kristen Corporation had the following stockholders\' equity

Question

On January 1, 2012, Kristen Corporation had the following stockholders' equity accounts. Common Stock ($24 par value, 55,000 shares issued and outstanding) 51,320,000 Paid-in Capital in Excess of Par Value 194,400 Retained Earnings 627,400 Dunng the year, the following transactions occurred. Feb. 1 Declared a $2 cash dividend per share to stockholders of record on February 15, payable March 1. Mar. 1 Paid the dividend declared in February. Apr. 1 Announced a 2-for-1 stock split. Prior to the split, the market price per share was $32. July 1 Declared a 12 %stock dividend to stockholders of record on July 15, distrinbutable July 31. On July 1, the market piece of the stock was $18 per share. July 31 Issued the shares for the stock dividend. Dec. 1 Dedared a $0.5 per share dividend to stockholders of record on December 15, payable January 5, 2013. Dec. 31 Determined that net income for the year was $332,570.

Explanation / Answer

Feb 1 Declared a $2 cash dividend paybale Mar 1 1 Feb12 Retained Earnings Dr 110,000 Dividend Payable Cr 110,000 (Dividen $2 per sharex 55,000 shares ) 1Mar Paid the $2 cash dividend declared. 1 Mar12 Dividend Payable Dr 110,000 Cash Cr 110,000 (Div paid) 1 Apr 2:1 Stock split. Mkt rice per share $32. The only journal entry needed for a stock split is a memo entry to note that the number of shares has changed and that the par value per share has changed. However, a typical journal entry with debits and credits is not needed since the total dollar amounts for the par value and other components of paid-in capital and stockholders’ equity do not change.So here, K Corp has 55,000 shares of $24 par value stock and it declares a 2-for-1 stock split, the corporation will have 2*55000=110,000 shares with a par value of $12 per share. Before and after the stock split, the total par value is $24*55000 = $ 1,320,000 . Other account balances within stockholders’ equity also remain the same. Jul 1 Distributed a 12% stock dividend ...... The market value of common stock was $18 per share. (No of sahres o/s 110,000. So 12% Stock Div = 12%*110,000 = 13,200 shares) 1 Jul REtaied earning Dr 237,600 Paidin Capi in excess Dr 79,200 Common Stock Cr 316800 (13200 shares x $18 = 237600 & at Par 13200*24 = 316800) Jul 31 Issued Stokc div shares. No entry is reqd for this as it is a followup action to stock dividend Dec 1 Declared $0.50 div on shares, payable Jan 5,13 1 Dec 12 Retained Earnings Dr 61600 Div Payable Cr $61600 (Div $0.50 X(110,000+13200) = 61600) Dec 31 Net Income Dr 332,570 Retained earnings Cr 332,570 (Close Net Income to Retained earnngs)

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