The balance sheet of Consolidated Paper, Inc., included the following shareholde
ID: 2395277 • Letter: T
Question
The balance sheet of Consolidated Paper, Inc., included the following shareholders’ equity accounts at December 31, 2017:
During 2018, several events and transactions affected the retained earnings of Consolidated Paper.
Required:
1. Prepare the appropriate entries for these events.
On March 3 the board of directors declared a property dividend of 215,000 shares of Leasco International common stock that Consolidated Paper had purchased in January as an investment (book value: $632,000). The investment shares had a fair value of $3 per share and were distributed March 31 to shareholders of record March 15.
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.
On July 5 a 1% common stock dividend was declared and distributed. The market value of the common stock was $11 per share.
On December 1 the board of directors declared the 8.0% cash dividend on the 83,000 preferred shares, payable on December 28 to shareholders of record December 20.
On December 1 the board of directors declared a cash dividend of $0.40 per share on its common shares, payable on December 28 to shareholders of record December 20.
2. Prepare the shareholders' equity section of the balance sheet for Consolidated Paper, Inc., at December 31, 2018. Net income for the year was $730,000.
Explanation / Answer
Answer 1. Journal Entry S. No. Date Particulars Dr. Amt. Cr. Amt. a-1 3-Mar Investment in Leasco International Stock 13,000.00 (215,000 Shares X $3) - $632,000 Gain on Appreciation of Investments 13,000.00 (To record the gain on appreciation of Investments) a-2 3-Mar Retained Earnings 632,000.00 Property Dividends Payable 632,000.00 (To record the property dividend declared) a-3 15-Mar No Journal entry a-4 31-Mar Property Dividends Payable 632,000.00 Investment in Leasco International Stock 632,000.00 (To record the property dividend paid) b 3-May Paid in Capital - Excess of Par - Common 82,500.00 25% X (333,300 Shares - 3,300 Shares) X $1 Common Stock 82,500.00 (To record the Common Stock dividend declared & paid) c 5-Jul Retained Earnings 45,375.00 4,125 Shares X $11 Common Stock 4,125.00 4,125 Shares X $1 Paid in Capital - Excess of Par - Common 41,250.00 4,125 Shares X $10 (To record the Common Stock dividend declared & paid) Stock Dividend - Shares = 1% X (330,000 Shares + 82,500 Shares) Stock Dividend - Shares = 4,125 Shares d-1 1-Dec Retained Earnings 6,640.00 $83,000 X 8% Cash Dividends Payable - Preference 6,640.00 (To record the preference dividend declared) d-2 20-Dec No entry d-3 28-Dec Cash Dividends Payable - Preference 6,640.00 Cash 6,640.00 (To record the preference dividend paid) e-1 1-Dec Retained Earnings 166,650.00 $0.40 X (330,0000 sh. + 82,500 sh. + 4,125 sh.) Cash Dividends Payable - Common 166,650.00 (To record the common dividend declared) e-2 20-Dec No entry e-3 28-Dec Cash Dividends Payable - Common 166,650.00 Cash 166,650.00 (To record the common dividend paid) Answer 2. CONSOLIDATED PAPER INC. (Shareholders' Equity Section) Dec 31, 2018 Shareholders' Equity Paid-in Capital Preferred Stock, 8%, 83,000 Shares at $1 par 83,000.00 Common Stock, 419,925 Shares at $1 par 419,925.00 Paid-in Capital Excess of par - Preferred 1,455,000.00 Paid-in Capital Excess of par - Common 2,463,750.00 Total Paid-in Capital 4,421,675.00 Retained Earnings 8,224,335.00 Treasury Stock, 3,300 shares (36,300.00) Total Shareholders' Equity 12,609,710.00 Paid-in Capital Excess of Par - Common = $2,505,000 -$82,500 +$41,250 Paid-in Capital Excess of Par - Common = $2,667,250 Retained Earnings = $8,345,000 - $632,000 - $45,375 - $6,640 - $166,650 + $730,000 Retained Earnings = $8,224,335
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