Question Help * Ralston Sports Corporation completed the following selected tran
ID: 2590636 • Letter: Q
Question
Question Help * Ralston Sports Corporation completed the following selected transactions during 2016 (Click the icon to view the transactions.) 1. Record the transactions in the journal. Recoed debits first, then credits. Exclude explanations from any journal entries. If no journal enbry is required, select "No entry required" on the first ine of the Accounts column and leave all other cells blank) Jan 6: Dedlared a cash dividend on the 10,000 shares of $3.00, no-par preferred stock outstanding. Declared a $0.45 per share dividend on the 15,000 shares of common stock outstanding The date of record January 17, and the payment date is January 20. Start by preparing te necessary entry on the date of declaraton--January 6·@repare & compound entry.) Journal Entry Date Debit Credit Jan Jan 20: Paid the cash dividends. Journal Entry Date Debit Credit Mar 21: Split common stock 2-f6r-1 by calling in the 15,000 shares of $12 par common stock and issuing new stock in its place Journal Entry Mar 21 Apr 18: Declared and distrbuted 20% stock dividend on the common stock. The market value of the common stock was $34 per share. Journal Entry Debit Apr 18 Jun 18: Purchased 800 shares of treasury common stock at $28 per shane. Journal E Date Credit Jun 18 Dec 22: Sold 400 shares of treasury common stock for $34 per share Choose from any list or enter any number in the input fields and then continue to the next questionExplanation / Answer
BOOKS OF RALSTON SPORTS CORPORATION
JOURNAL
DATE ACCOUNTS DEBIT CREDIT
$ $
2016
JAN 6 Preference dividends 30000
Preference dividend
payable 30000
(being cash dividend on 10000 shares of no-par preference stock at $3 per share)
JAN 6 Retained earnings 6750
Dividend payable 6750
(being cash dividend declared on 15000 shares common stock at $0.45 per share)
Explanation: The record date is not relevant here. The liability arises on the date of declaration. Hence, the entry should be passed on January 6.
JAN 20 Preference dividend payable 30000
Dividend payable 6750
Cash/Bank 36750
(being dividend paid)
MAR 21 No journal entry required.
Explanation: As account values do not undergo any change as a result of the stock split, no journal entry is required. However, a memorandum entry as shown below is passed.
“A 2-for-1 stock split has been declared. As a result, the number of shares outstanding of common stock has increased from 15000 to 30000 shares. The par value of each share has reduced from $12 per share to $6 per share. The 15000 new shares were distributed.”
APR 18 Retained earnings 204000
Common stock dividend
distributable 36000
Additional paid-in capital
in excess of par 168000
Common stock dividend
distributable 36000
Common stock 36000
(being 20% stock dividend declared on the common stock outstanding. The 6000 shares were duly distributed.)
Explanation: The stock dividend qualifies as a small stock dividend as the percentage is 20%. Hence, an amount equal to the market value of the shares being issued should be transferred from the retained earnings. This amount is $204000 (30000 X 20% X 34). The par value of the 6000 shares is credited to common stock on distribution and the excess of market value over the par value $168000 ($28 X 6000) is treated as paid-in capital excess of par.
JUN 18 Treasury stock 22400
Cash/Bank 22400
(being 800 shares of common stock repurchased from stockholders)
DEC 22 Cash/Bank 13600
Treasury stock 11200
Additional paid-in capital
in excess of par 2400
(being 400 shares of treasury stock distributed)
Explanation: The 400 shares of treasury stock are being sold in excess of the purchase price. Therefore,
BOOKS OF RALSTON SPORTS CORPORATION
JOURNAL
DATE ACCOUNTS DEBIT CREDIT
$ $
2016
JAN 6 Preference dividends 30000
Preference dividend payable 30000
(being cash dividend on 10000 shares of no-par preference stock at $3 per share)
JAN 6 Retained earnings 6750
Dividend payable 6750
(being cash dividend declared on 15000 shares common stock at $0.45 per share)
Explanation: The record date is not relevant here. The liability arises on the date of declaration. Hence, the entry should be passed on January 6.
JAN 20 Preference dividend
payable 30000
Dividend payable 6750
Cash/Bank 36750
(being dividend paid)
MAR 21 No journal entry required.
Explanation: As account values do not undergo any change as a result of the stock split, no journal entry is required. However, a memorandum entry as shown below is passed.
“A 2-for-1 stock split has been declared. As a result, the number of shares outstanding of common stock has increased from 15000 to 30000 shares. The par value of each share has reduced from $12 per share to $6 per share. The 15000 new shares were distributed.”
APR 18 Retained earnings 204000
Common stock dividend distributable 36000
Additional paid-in capital
in excess of par 168000
Common stock dividend
distributable 36000
Common stock 36000
(being 20% stock dividend declared on the common stock outstanding. The 6000 shares were duly distributed.)
Explanation: The stock dividend qualifies as a small stock dividend as the percentage is 20%. Hence, an amount equal to the market value of the shares being issued should be transferred from the retained earnings. This amount is $204000 (30000 X 20% X 34). The par value of the 6000 shares is credited to common stock on distribution and the excess of market value over the par value $168000 ($28 X 6000) is treated as paid-in capital excess of par.
JUN 18 Treasury stock 22400 Cash/Bank 22400
(being 800 shares of common stock repurchased from stockholders)
Explanation: We have followed the cost method.
DEC 22
Cash/Bank 13600
Treasury stock 11200
Additional paid-in capital
in excess of par 2400
(being 400 shares of treasury stock distributed)
Explanation: The 400 shares of treasury stock are being sold in excess of the purchase price.
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