The balance sheet of Consolidated Paper, Inc., included the following shareholde

Question

The balance sheet of Consolidated Paper, Inc., included the following shareholders' equity accounts at December 31, 2015 Paid-in capital Preferred stock, 8.8%, 90,000 shares at $1 par Common stock, 364,000 shares at $1 par Paid-in capita-excess of par, preferred Paid-in capital-excess of par, common $ 90,000 364,000 1,437,000 2,574,000 9,735,000 (44,000) Retained earnings Treasury stock, at cost, 4,000 common shares Total shareholders' equity $14,156,000 During 2016, several events and transactions affected the retained earnings of Consolidated Paper Required 1. Prepare the appropriate entries for these events. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) a. On March 3 the board of directors declared a property dividend of 240,000 shares of Leasco International common stock that Consolidated Paper had purchased in January as an investment (book value $700,000). The investment shares had a fair value of $3 per share and were distributed March 31 to shareholders of record March 15 b. On May 3 a 5-for-4 stock split was declared and distributed. The stock split was effected in the form of a c. On July 5 a 2% common stock dividend was declared and distributed. The market value of the common d. On December 1 the board of directors declared the 8.8% cash dividend on the 90,000 preferred shares, e. On December 1 the board of directors declared a cash dividend of $.50 per share on its common shares 25% stock dividend. The market value of the $1 par common stock was $11 per share stock was $11 per share payable on December 28 to shareholders of record December 20 payable on December 28 to shareholders of record December 20 View transaction list Journal entry worksheet |1|2345678 12 (a) Record any necessary adjustments to the Leasco International stock account as a result of the property dividend declaration

Explanation / Answer

1.

Note: Treasury stocks are excluded for all computations of dividends.

2.

Workings:

No. Date General Journal Debit Credit 1 March 03 Investment in Leasco International 20000 Gain on appreciation [(240000 x $3) - $700000] 20000 (To record investment at fair value) 2 March 03 Retained earnings 720000 Dividends payable 720000 (To record declaration of property dividend) 3 March 15 No journal entry required 4 March 31 Dividends payable 720000 Investment in Leasco International 720000 (To record distribution of property dividend) 5 May 03 Paid-in capital -excess of par, common stock 90000 Common stock [(25% x 360000) x $1] 90000 (To record declaration and distribution of stock dividend) 6 July 05 Retained earnings [2% x (360000 + 90000) x $11] 99000 Common stock [2% x (360000 + 90000) x $1] 9000 Paid-in-capital-excess of par, common stock 90000 [2% x (360000 + 90000) x $10] (To record declaration and distribution of stock dividend) 7 December 01 Retained earnings 7920 Dividends payable ($90000 x 8.8%) 7920 (To record declaration of cash dividends on preferred stock) 8 December 20 No journal entry required 9 December 28 Dividends payable 7920 Cash 7920 (To record distribution of preferred cash dividends) 10 December 01 Retained earnings 229500 Dividends payable [$0.50 x (360000 + 90000 + 9000)] 229500 (To record declaration of cash dividends on common stock) 11 December 20 No journal entry required 12 December 28 Dividends payable 229500 Cash 229500 (To record distribution of cash dividends on common stock)

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