On January 1, 2012, Kristen Corporation had the following stockholders\' equity
ID: 2365620 • Letter: O
Question
On January 1, 2012, Kristen Corporation had the following stockholders' equity accounts. Common stock ($20 par value, 60,000 shares issued and outstanding) $1,200,000, Paid-in Capital in Excess of Par-- Common Stock 200,000 and Reatained Earnings 600,000. During the Year, the following transactions occured. Feb 1 Declared $1 cash dividend per share to stockholders of record on February 15, payable March 1 Mar 1 Paid the dividend declared in Feb Apr 1 Announced a 2-for-1 stock split. Prior to the split, the market price per share was $36 Jul 1 Declared a 10% stock dividend to stockholders of record on jul 15, distributable jul 31. On July 1, the market price of the stock was $13 Jul 31 Issued the shares for the stock dividend Dec 1 Declared $0.50 per share dividend to stockholders of record on December 15, payable Jan 5, 2015 Dec 31 Determined that net income for the year was $350,000 Instructions A. Journalize the transactions and the closing entry for net income B. Enter the beginning balances, and post these entries to the stockholders' equity accounts C. Prepare a stockholders' equtiyt section at Dec 31.Explanation / Answer
Feb. 1 Retained Earnings (60,000 X $1)........................................................... 60,000
Dividends Payable.................................................................. 60,000
Mar. 1 Dividends Payable............................................................... 60,000
Cash........................................................................................ 60,000
Apr. 1 Memo—two-for-one stock split
increases number of shares to
120,000 = (60,000 X 2) and reduces
par value to $10 per share.
July 1 Retained Earnings (12,000 X $13)..................................... 156,000
Common Stock Dividends
Distributable (12,000 X $10)............................................. 120,000
Paid-in Capital in Excess of
Par Value (12,000 X $3).................................................... 36,000
31 Common Stock Dividends
Distributable.................................................................... 120,000
Common Stock....................................................................... 120,000
Dec. 1 Retained Earnings (132,000 X $.50).................................... 66,000
Dividends Payable.................................................................. 66,000
31 Income Summary................................................................ 350,000
Retained Earnings................................................................. 350,000
(b)
Common Stock
Date
Explanation
Ref.
Debit
Credit
Balance
Jan. 1
Apr. 1
July 31
Balance
2 for 1 split—new
par $10
120,000
1,200,000
1,320,000
Common Stock Dividends Distributable
Date
Explanation
Ref.
Debit
Credit
Balance
July 1
31
120,000
120,000
120,000
0
Paid-in Capital in Excess of Par Value
Date
Explanation
Ref.
Debit
Credit
Balance
Jan. 1
July 1
Balance
36,000
200,000
236,000
Retained Earnings
Date
Explanation
Ref.
Debit
Credit
Balance
Jan. 1
Feb. 1
July 1
Dec. 1
31
Balance
Cash dividend
Stock dividend
Cash dividend
Net income
60,000
156,000
66,000
350,000
600,000
540,000
384,000
318,000
668,000
=========
Stockholders’ equity
Paid-in capital
Capital stock
Common stock, $10 par value, 132,000
shares issued and outstanding....................................... $1,320,000
Additional paid-in capital
In excess of par value......................................................... 236,000
Total paid-in capital................................................. 1,556,000
Retained earnings.................................................................................. 668,000
Total stockholders’ equity....................................... $2,224,000
Date
Explanation
Ref.
Debit
Credit
Balance
Jan. 1
Apr. 1
July 31
Balance
2 for 1 split—new
par $10
120,000
1,200,000
1,320,000
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