The MLC Corporation had the following equity accounts at the beginning of 2016:
ID: 2602854 • Letter: T
Question
The MLC Corporation had the following equity accounts at the beginning of 2016: Common stock, $2 par value, 400,000 shares authorized Paid-in capital in excess of par value Retained earnings S 200,000 90,000 Total stockholders' equity $1,030.000 The following transactions occurred during 2016 Date Transactions 2/1 Declared a SI dividend per share 3/2 Paid the cash dividend declared on February 1 5/12 Authorized a 2-for-1 stock split 9/9 Purchased 10,000 shares of common stock for the treasury at a cost of $11 per share 10/19 Declared a10% common stock dividend. The market value on the date of declaration was $10 per share. 11/12 Issued the shares for the stock dividend declared on October 19. 12/31 Reported a net loss of $120,000 for the year. 44r0 REQUIRED a) Prepare journal entries to record these transactions (56 Pts) b Betie the stockholdess'efuity Section o f MLC Corpotatien s balance sheet as 12/3/ 2a16Explanation / Answer
Solution:
Part 1 – Journal Entries
Date
Account Titles and Explanation
Debit
Credit
2/1/2016
Retained Earnings
$100,000
Cash Dividend Payable (100,000 Shares x $1)
$100,000
3/2/2016
Cash Dividend Payable
$100,000
Cash
$100,000
5/12/2016
Memorandum: A 2 for 1 stock split increase the number of shares of common stock outstanding from 100,000 Shares to 200,000 Shares and reduced the par value from $2 to $1 Per share. The new 100,000 Shares were distributed
Following Memorandum entry is to be passed
Common Stock (100,000 Shares x $2)
$200,000
Common Stock (200,000 Shares x $1)
$200,000
9/9/2016
Treasury Stock (10,000 Shares x $11)
$110,000
Cash
$110,000
10/19/2016
Retained Earnings (19,000 Shares x MP $10)
$190,000
Common Stock Dividend Payable
$190,000
Number of Outstanding Shares = 200,000 Shares - Treasury 10,000 = 190,000 Shares
Stock Dividend = 190,000 Shares x 10% = 19,000 Shares
11/12/2016
Common Stock Dividend Payable
$190,000
Common Stock (19,000 Shares x Par Value $1)
$19,000
Paid in capital in excess of par value
$171,000
12/31/2016
Retained Earnings
$120,000
Income Summary Statement
$120,000
Part 2 – Stockholders Equity Section
Stockholders’ Equity
December 31, 2016
Common Stock, $1 par value (400,000 Shares authorized)
(Issued and paid up shares (100,000 + 100,000 Stock Split + Stock Dividend 19,000 Shares)
$219,000
Paid-in capital in excess of par value, common stock (90,000 + 171,000)
$261,000
Retained Earnings
(740,000 - 100,000 Cash Dividend - 190,000 Stock Dividend - Net Loss 120,000)
$330,000
Total Paid in Capital and Retained Earnings
$810,000
Less:
Treasury Stock (10,000 Shares at $11)
$110,000
Total Stockholders' Equity
$700,000
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Date
Account Titles and Explanation
Debit
Credit
2/1/2016
Retained Earnings
$100,000
Cash Dividend Payable (100,000 Shares x $1)
$100,000
3/2/2016
Cash Dividend Payable
$100,000
Cash
$100,000
5/12/2016
Memorandum: A 2 for 1 stock split increase the number of shares of common stock outstanding from 100,000 Shares to 200,000 Shares and reduced the par value from $2 to $1 Per share. The new 100,000 Shares were distributed
Following Memorandum entry is to be passed
Common Stock (100,000 Shares x $2)
$200,000
Common Stock (200,000 Shares x $1)
$200,000
9/9/2016
Treasury Stock (10,000 Shares x $11)
$110,000
Cash
$110,000
10/19/2016
Retained Earnings (19,000 Shares x MP $10)
$190,000
Common Stock Dividend Payable
$190,000
Number of Outstanding Shares = 200,000 Shares - Treasury 10,000 = 190,000 Shares
Stock Dividend = 190,000 Shares x 10% = 19,000 Shares
11/12/2016
Common Stock Dividend Payable
$190,000
Common Stock (19,000 Shares x Par Value $1)
$19,000
Paid in capital in excess of par value
$171,000
12/31/2016
Retained Earnings
$120,000
Income Summary Statement
$120,000
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