PROBLEM 4 (13 points): On January 1, 2017, Smart Corp had Common Stock ($12 par
ID: 2401108 • Letter: P
Question
PROBLEM 4 (13 points): On January 1, 2017, Smart Corp had Common Stock ($12 par value, 120,000 shares issued and utstanding) worth $1,440,000: Paid-in Capital in Excess of Par-Common Stock $250,000, and Retained Earnings $380.000. uring the year, the following transactions occurred. Declared a $2 cash dividend per share to stockholders of record on January 31, payable February 12 Jan. 15 Feb. 12 Apr. 14 May 15 July 5 Dec. 1 Dec. 31 Paid the dividend declared in January. Declared a 12% stock dividend to stockholders of record on April 30, distributable May 15, On April 15, the market price of the stock was $14 per share. Issued the shares for the stock dividend. Announced a 3-for-1 stock split. The market price per share prior to the announcement was $18, Declared a $0.60 per share cash dividend to stockholders of record on December 15, payable Jan. 10, 2018. Determined that net income for the year was $210,000. tructions: Journalize the transactions and closing entries for net income and dividends. Note: Write clearly and use mplete account names [Do not abbreviate]. General Journal J 1 Account Titles and Explanation Ref.Debit Credit DateExplanation / Answer
Solution:
Date
Account Titles and Explanation
Debit
Credit
Jan.15
Retained Earnings (120,000 Shares *$2)
$240,000
Cash Dividend Payable
$240,000
(To record declaration of Cash dividend $2 each share)
Jan.31
No Entry is required on Record Date
Feb.12
Cash Dividend Payable
$240,000
Cash
$240,000
( To record cash dividend paid declared on Jan.15)
April.14
Retained Earnings
$201,600
Stock Dividend Distributable
$201,600
(to record declaration of stock dividend 12%)
(Number of Outstanding Shares before stock dividend 120,000 Shares x 12% * Market Price $14)
(Number of Outstanding Shares after stock dividend = 120,000 + 14,400 = 134,400 Shares)
April.30
No Entry is required on Record Date
May.15
Stock Dividend Distributable
$201,600
Common Stock (Number of Shares distributed 14,400 Shares * Par Value $12)
$172,800
Paid in Capital in Excess of Par - Common Stock (Bal fig)
$28,800
July.5
Memorandum: A 3 for 1 stock split increase the number of shares of common stock outstanding from 134,400 Shares to 403,200 Shares and reduced the par value from $12 to $4 per share ($12 par value / 3 stock for 1). The new 268,800 Shares were distributed
Dec.1
Retained Earnings (403,200 Shares *$0.60)
$241,920
Cash Dividend Payable
$241,920
(To record declaration of Cash dividend $0.60 each share)
Dec.15
No Entry is required on Record Date
Dec.31
Income Summary Statement
$210,000
Retained Earnigns
$210,000
(To record closing entry of Income transferred from Income Summary to Retained Earnings)
Hope the above calculations, working and explanations are clear to you and help you in understanding the concept of question.... please rate my answer...in case any doubt, post a comment and I will try to resolve the doubt ASAP…thank you
Date
Account Titles and Explanation
Debit
Credit
Jan.15
Retained Earnings (120,000 Shares *$2)
$240,000
Cash Dividend Payable
$240,000
(To record declaration of Cash dividend $2 each share)
Jan.31
No Entry is required on Record Date
Feb.12
Cash Dividend Payable
$240,000
Cash
$240,000
( To record cash dividend paid declared on Jan.15)
April.14
Retained Earnings
$201,600
Stock Dividend Distributable
$201,600
(to record declaration of stock dividend 12%)
(Number of Outstanding Shares before stock dividend 120,000 Shares x 12% * Market Price $14)
(Number of Outstanding Shares after stock dividend = 120,000 + 14,400 = 134,400 Shares)
April.30
No Entry is required on Record Date
May.15
Stock Dividend Distributable
$201,600
Common Stock (Number of Shares distributed 14,400 Shares * Par Value $12)
$172,800
Paid in Capital in Excess of Par - Common Stock (Bal fig)
$28,800
July.5
Memorandum: A 3 for 1 stock split increase the number of shares of common stock outstanding from 134,400 Shares to 403,200 Shares and reduced the par value from $12 to $4 per share ($12 par value / 3 stock for 1). The new 268,800 Shares were distributed
Dec.1
Retained Earnings (403,200 Shares *$0.60)
$241,920
Cash Dividend Payable
$241,920
(To record declaration of Cash dividend $0.60 each share)
Dec.15
No Entry is required on Record Date
Dec.31
Income Summary Statement
$210,000
Retained Earnigns
$210,000
(To record closing entry of Income transferred from Income Summary to Retained Earnings)
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.