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Reporting Stockholders\' Equity The Stockholders\'Equit oblem 13-65 ders Equity

ID: 2422145 • Letter: R

Question

Reporting Stockholders' Equity The Stockholders'Equit oblem 13-65 ders Equity section of Nilsson Corporation's balance sheet as of December 31,2014, is as follows Common stock ($5 par, 500,000 shares authorized, ow mana ud $1,375,000 550,000 Paid-in capital in excess of par Total paid-in capital Unappropriated retained earnings Appropriated retained earnings Total retained earnings $1,925,000 $1,335,000 500,000 1,835,000 $3,760,000 Total stockholders' equity Nilsson Corporation had the following stockholders equity transactions during 201s Jan. 15 Mar. May 18 June 19 uly 31 Paid the dividend. Completed the building renovation, for which $500,000 of retained earnings had been restricted. Paid the contractor $485,000, all of which is capitalized. Issued 100,000 additional shares of the common stock for $8 per share. Declared a dividend of $1.50 per share to be paid on July 31, 2015, to stockholders of record on June 30, 2015 Approved additional building renovation to be funded internally. The estimated cost of the project is $400,000, and retained earnings are to be restricted for that amount. 3 Declared a property dividend to be paid on December 31, 2015, to stockholders of record on November 30, 2015. The dividend is to consist of 35,000 shares of Hampton Inc. stock that are currently recorded in Nilsson's books at $9 per share. The fair market value of the stock on November 12 is $13 per share. Reported $885,000 of net income on the December 31, 2015, income statement. (Assume that revenues and expenses were closed to a temporary account, Income Summary. Use this account to complete the closing process.) In addition, the stock was distributed in satisfaction of the Nov. 12 Dec. 31 property dividend. The Hampton stock closed at $14 per share at the end of the day's trading.

Explanation / Answer

Nilsson Corporation

(‘1) Journal Entries

Date

Account Title and Explanation

Debit

Credit

Jan 15

Appropriated retained earnings

500,000

Retained Earnings

500,000

Mar 3

Cash

800,000

Common Stock (100,000 x $5)

500,000

Paid in Capital in excess of par

300,000

May 18

Retained Earnings

562,500

Dividend Payable (375000 x $1.5)

562,500

June 19

Retained Earnings

400,000

Appropriated Retained Earnings

400,000

July 31

Dividend Payable

562,500

Cash

562,500

Nov 12

Retained Earnings (35,000 x $13)

455,000

Dividend Payable

455,000

Nov 12

Investment in Hampton Inc Stock

(35000 x $4)

140,000

Gain on Investment

140,000

Dec 31

Dividend Payable

455,000

Investment in Hampton Inc Stock

455,000

Dec 31

Income Summary

885,000

Retained Earnings

885,000

(‘2) Stockholders’ Equity as at Dec 31,2015

Particulars

Amount

Amount

Common Stock ( $5 par , 500,000 shares authorised , 375,000 issued and outstanding)

1,875,000

Paid in capital in excess of par

850,000

2,725,000

Appropriated retained earnings

400,000

Date

Account Title and Explanation

Debit

Credit

Jan 15

Appropriated retained earnings

500,000

Retained Earnings

500,000

Mar 3

Cash

800,000

Common Stock (100,000 x $5)

500,000

Paid in Capital in excess of par

300,000

May 18

Retained Earnings

562,500

Dividend Payable (375000 x $1.5)

562,500

June 19

Retained Earnings

400,000

Appropriated Retained Earnings

400,000

July 31

Dividend Payable

562,500

Cash

562,500

Nov 12

Retained Earnings (35,000 x $13)

455,000

Dividend Payable

455,000

Nov 12

Investment in Hampton Inc Stock

(35000 x $4)

140,000

Gain on Investment

140,000

Dec 31

Dividend Payable

455,000

Investment in Hampton Inc Stock

455,000

Dec 31

Income Summary

885,000

Retained Earnings

885,000

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