The stockholders’ equity section of Nielsen Corporation’s December 31, 2011, bal

Question

The stockholders’ equity section of Nielsen Corporation’s December 31, 2011, balance sheet is as
follows:

Stockholders’ Equity
Contributed capital:
Preferred stock (10%, $50 par, 10,000 shares authorized,
1,000 shares issued and outstanding). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 50,000
Common stock ($15 par, 100,000 shares authorized,
5,000 shares issued and outstanding). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75,000
Paid-in capital in excess of par, preferred stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000
Paid-in capital in excess of par, common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,000
Total contributed capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $152,000
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102,000
Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $254,000

During 2012, Nielsen Corporation had the following transactions affecting stockholders’ equity:
Jan. 20 Paid a cash dividend of $2 per share on common stock. The dividend was declared on December 15, 2011.

Aug. 15 Reacquired 1,000 shares of common stock at $20 per share.
Sept. 30 Reissued 500 shares of treasury stock at $21 per share.
Oct. 15 Declared and paid cash dividends of $3 per share on the common stock.
Nov. 1 Reissued 200 shares of treasury stock at $18 per share.
Dec. 15 Declared and paid the 10% preferred cash dividend.
Dec. 31 Closed net income of $40,000 to Retained Earnings. (Revenues were $260,000; expenses
were $220,000.) Also closed the dividends accounts to Retained Earnings.

Required:
1. Journalize the transactions.
2. Prepare the stockholders’ equity section of Nielsen December 31, 2012, balance sheet.

I am not quite sure about the dividends account. Could you explain more specifically about this?

Explanation / Answer

1.

2.

The cash dividend paid on Jan.20 , is already declared in the prevoius year. Therefore it eeds only payment entry.

The cash dividend declared and paid on Oct.15 will becalculated as under.

Nielsen Corporation Journal entries for the year ending December 31, 2012 Date Account title Debit credit Jan.20 Dividend payable 10000 Cash 10000 (To record payment of cash dividend ) Aug.15 Treasury stock 20000 Cash 20000 (To record reacquing of sahres of common stock) Sept.30 Cash 10500 Treasury stock 10000 Additional paid in capital - common stock 500 (To record reissue of 500 shres of treasury stock) Oct.15 Dividends 13500 Dividend payable 13500 (To record dividend declared on 4,500 shares @$3) Dividend payable 13500 Cash 13500 (To record payment of common stock cash dividend ) Nov.1 Cash 3600 Additional paid in capital - common stock 400 Treasury stock 4000 (To record reissue of 200 shares of treasury stock) Dec.15 Dividends 5000 Dividend payable 5000 (To record declaration of preferred dividend) Dividend payable 5000 Cash 5000 (To record payment of preferred dividend) Dec.31 Income summary 40000 Retained earnings 40000 (To record closing of net income to retained earnings) Retained earnings 18500 Dividends 18500 (To record closing of dividends account to retained earnings)

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