Part C On October 1, 2016, Nicklaus Corporation receives permission to replace i
ID: 2501076 • Letter: P
Question
Part C On October 1, 2016, Nicklaus Corporation receives permission to replace its $1 par value common stock (6,000,000 shares authorized, 4,000,000 shares issued, and 3,800,000 shares outstanding) with a new common stock issue having a $.50 par value. Since the new par value is one-half the amount of the old, this represents a 2-for-1 stock split. That is, the shareholders will receive two shares of the $.50 par stock in exchange for each share of the $1 par stock they own. The $1 par stock will be collected and destroyed by the issuing corporation. On November 1, 2016, the Nicklaus Corporation declares a $0.19 per share cash dividend on common stock and a $0.36 per share cash dividend on preferred stock. Payment is scheduled for December 1, 2016, to shareholders of record on November 15, 2016. On December 2, 2016, the Nicklaus Corporation declares a 1% stock dividend payable on December 28, 2016, to shareholders of record on December 14. At the date of declaration, the common stock was selling in the open market at $15 per share. The dividend will result in 76,000 (0.01 × 7,600,000) additional shares being issued to shareholders. Required: 1. Prepare journal entries to record the declaration and payment of these stock and cash dividends. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) 2. Prepare the December 31, 2016, shareholders' equity section of the balance sheet for the Nicklaus Corporation. (Assume net income for the fourth quarter was $2,800,000.) 3. Prepare a statement of shareholders' equity for Nicklaus Corporation for 2016. (Amounts to be deducted should be indicated with a minus sign. Enter your answers in thousands.)
Explanation / Answer
1. Journal Entries are: Debit $ Credit $
15 Nov. 2016 Retained Earnings 1,444,000
(record date) Cash Dividend payable (Common Stock) 1,444,000
01 Dec. 2016 Cash Dividend payable (Common Stock) 1,444,000
Cash A/c 1,444,000
Preferred Stock Cash Dividend - No Journal entry
14 Dec. 2016 Retained Earnings 1,140,000
Common Stock Dividend Distributable 38,000
Paid in Capital in Excess of par 1,102,000
28 Dec. 2016 Common Stock Dividend Distributable 38,000
Common Stock 38,000
2. Shareholders' equity section of the balance sheet for the Nicklaus Corporation. on December 31, 2016:
SHAREHOLDERS' EQUITY SECTION :
Common Stock: $
12,000,000 shares authorized Par value $0.50 6,000,000
8,000,000 shares issued 4,000,000
7,676,000 shares outstanding 3,838,000
Retained Earnings 2,800,000
Less: Cash dividend 1,444,000
Less: Stock dividend 1,140,000 216,000
Total Share holders fund 4,054,000
3. Statement of shareholders' equity for Nicklaus Corporation for 2016 :
PARTICULARS AMOUNT($ in thousand)
Common Stock paid-up (3800000 @ $1) $3,800
Less:Common Stock paid-up (3800000 @ $1) cancelled ( $3,800)
Nil
Common Stock paid-up (7600000 @ $0.50 $3,800
Common Stock - Stock Dividend (76000 @$0.50) 38
Equity $0.50 Common Stock $3,838
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