Earnhart Corporation has outstanding 3,025,000 shares of common stock of a par v
ID: 2424559 • Letter: E
Question
Earnhart Corporation has outstanding 3,025,000 shares of common stock of a par value of $10 each. The balance in its Retained Earnings account at January 1, 2014, was $24,610,000, and it then had Paid-in Capital in Excess of Par—Common Stock of $5,198,000. During 2014, the company’s net income was $4,720,000. A cash dividend of $0.50 a share was declared on May 5, 2014, and was paid June 30, 2014, and a 5% stock dividend was declared on November 30, 2014, and distributed to stockholders of record at the close of business on December 31, 2014. You have been asked to advise on the proper accounting treatment of the stock dividend.
The existing stock of the company is quoted on a national stock exchange. The market price of the stock has been as follows.
(Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
No.
Date
Account Titles and Explanation
Debit
Credit
May 5
June 30
Nov. 30
Dec. 31
(c1) Prepare the stockholders’ equity section (including schedules of retained earnings and additional paid-in capital) of the balance sheet of Earnhart Corporation for the year 2014 on the basis of the foregoing information. (List items that increase retained earnings first.)
Schedule of Additional Paid-in Capital
For the Year Ended December 31, 2014
Statement of Retained Earnings
For the Year Ended December 31, 2014
EARNHART CORPORATION
Stockholders’ Equity
December 31, 2014
Explanation / Answer
Date Account Titles Debit Credit $ $ May 5 2014 Retained earnings 1,512,500 Common stock dividend payable 1,512,500 June 30 2014 Common stock dividends payable 1,512,500 Cash 1,512,500 November 30 2014 Retained earnings 5,293,750 Common stock dividend distributable 1,512,500 Paid-in capital in excess of par 3,781,250 December 31 2014 Common stock dividend distributable 1,512,500 Common stock 1,512,500
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.