Jan. 15 Split the common stock 4 for 1 and reduced the par from $120 to $30 per
ID: 2420069 • Letter: J
Question
Jan. 15 Split the common stock 4 for 1 and reduced the par from $120 to $30 per share. After the split, there were 800,000 common shares outstanding.
Mar. 1 Declared semiannual dividends of $0.25 on 100,000 shares of preferred stock and $0.07 on the 800,000 shares of $30 par common stock to stockholders of record on March 31, payable on April 30.
Apr. 30 Paid the cash dividends.
May 31 Purchased 60,000 shares of the corporation’s own common stock at $32, recording the stock at cost.
Aug. 17 Sold 40,000 shares of treasury stock at $38, receiving cash.
Sep. 1 Declared semiannual dividends of $0.25 on the preferred stock and $0.09 on the common stock (before the stock dividend). In addition, a 1% common stock dividend was declared on the common stock outstanding, to be capitalized at the fair market value of the common stock, which is estimated at $40.
Oct. 31 Paid the cash dividends and issued the certificates for the common stock dividend.
Explanation / Answer
Date Accounts Title & Explanation Debit Credit Jan 15 Common stock :200000 shares @ 120 24000000 Common stock : 800000 shares @ 30 24000000 March 1 Common Dividend Declared: (800000*$0.07) 56000 Preferred Dividend Declared (100000*$0.25) 25000 Common Dividend Payable 56000 Preferred Dividend Payable 25000 Apr 30 Common Dividend Payable 56000 Preferred Dividend Payable 25000 Cash 81000 May 31 Treasury Stock (60000*32) 1920000 Cash 1920000 Aug 17 Cash (40000*38) 1520000 Additional Paid in Capital 240000 Treasury Stock 1920000*(40000/60000) 1280000 Sep 1 Common Dividend Declared (800000-60000+40000)*$0.09) 70200 Preferred Dividend Declared (100000*$0.25) 25000 Common Dividend Payable 70200 Preferred Dividend Payable 25000 Sep 1 Retained Earnings: (780000*1%*$40) 312000 Common Stock Dividend Distributable (780000*1%*$30) 234000 Paid in Capital in Excess of Par: (780000*1%)*(40-30) 78000 Oct 30 Common Dividend Payable 70200 Preferred Dividend Payable 25000 Cash 95200 Oct 30 Common Stock Dividend Distributable 234000 Common Stock 234000
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