Stockholders Equity and Earnings per Share STK-2) During 2012, P & P Products ma

Question

Stockholders Equity and Earnings per Share

STK-2) During 2012, P & P Products made the following common stock transactions involving class B stock. The common stock has par value of $10.

A. On January 5, P & P Products declared a property dividend of 1,000 shares of their investments in the ABC company stock. The stock has a fair market value of $25 per share. The stock cost P & P Products $20 per share. P & P issued the ABC stock one month later.

B. On February 14, P & P Products declared a 10 % stock dividend. On that date, the market value of the stock was $14. One month later they issued the common stock. Assume that P & P has 92,623 shares of $10 par value common stock outstanding prior to the stock dividend.

C. On August 12th, P & P Products declared a cash dividend of $0.50 per share of common stock. Assume that P & P had 92,623 shares of $10 par value common stock outstanding plus those issued as a result of the 10% stock dividend in part (B). (round your answer)

D. On October 14th, P & P Products issued a 2-for-1 stock split. Assume that the number of shares of common stock outstanding equals the number you used in part ( C).

E. On May 15th, P & P Products issued 5,000 shares of cumulative 8% preferred stock with a par value of $100 for $112 per share.

Required: Prepare any necessary entries for each of the scenarios above.

Explanation / Answer

date particulars debit credit jan 5 common stock a/c 20000

to property dividend 20000

14 feb cash 129672.2

to stock 92623

to profit 37049.2

12aug cash ( 46311.5+92623 ) 138934.5

to cash dividend 46311.5 to common stock 92623

14 oct cash 92623

to stock 92623

may15 cash 500000

discount 60000

to 8% preffered stock 560000

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