Exercise 10-22 Recording Cash and Stock Dividends Kirk Corporation had the follo
ID: 2717222 • Letter: E
Question
Exercise 10-22
Recording Cash and Stock Dividends
Kirk Corporation had the following amounts in equity before issuing its annual dividend:
Kirk has decided to issue a 5% stock dividend simultaneously with a $1 per share cash dividend. The date of declaration is November 12, and the payment date is November 29.
Required:
Prepare all journal entries necessary to record the declaration and payment of dividends. Assume that the stock was trading for $10 on the date of declaration and $12 on the date of payment. Also, assume the cash dividends were not paid on the additional shares of stock from the stock dividend. For a compound transaction, if an amount box does not require an entry, leave it blank or enter "0".
Nov. 12
Nov. 29
Nov. 29
27.
eBook
Exercise 10-23
Effect of Dividends
Elam Enterprises is considering the following three actions regarding its equity:
Required:
Describe whether each action would increase, decrease, or not affect the following:
Action 1
Action 2
Action 3
1. Total Stockholders' Equity
_________________
_________________
_________________
2. Retained Earnings
_________________
_________________
_________________
3. Contributed Capital
_________________
_________________
_________________
4. Par Value per Share
_________________
_________________
_________________
5. Price per Share
_________________
_________________
_________________
28.
eBook
Exercise 10-25
Cash Dividends
Cope Company declares a $90,000 dividend. Cope's common stock has a $5 par value and 80,000 shares outstanding. Cope's preferred stock is 5%, $12 par, and there are 20,000 shares outstanding. Cope has not paid dividends in the past three years. Cope's preferred stock is cumulative.
Required:
a. Determine how the $90,000 in dividends should be allocated to preferred and common stockholders.
Dividends distributed to preferred stockholders
$ _________________
Dividends distributed to common stockholders
$ _________________
b. Prepare the journal entry that would be recorded on the date of declaration. For compound journal entries, if an amount box does not require an entry, leave it blank.
c. Determine how the $90,000 in dividends should be allocated to preferred and common stockholders, assuming that the preferred stock is noncumulative.
Dividends distributed to preferred stockholders
$ _________________
Dividends distributed to common stockholders
$ _________________
29.
eBook
Exercise 10-27
Treasury Stock
Required:
On January 15, Capital Corporation purchased 2,000 shares of its own common stock when the stock was trading at $45. On June 15, Capital Corporation reissued 500 of these same shares for $50 per share.
Required:
Prepare the journal entries to record the purchase and reissuance of the treasury stock. Use the cost method. For compound journal entries, if an amount box does not require an entry, leave it blank or enter "0".
Jan. 15
June 15
30.
eBook
Exercise 10-29
Reporting Stockholders' Equity
A portion of the balance sheet of Amanda Airlines appears below:
Required:
Fill in missing values.
Common stock, $5 par, 5,000 shares issued, 4,000 outstanding
$ _________________
Additional paid-in capital
_________________
Total contributed capital
170,000
Retained earnings
75,000
_________________
(8,000)
Total stockholders' equity
$ _________________
Determine the cost per share of the treasury stock.
$ _________________ per share
Prepare all journal entries necessary to record the declaration and payment of dividends. Assume that the stock was trading for $10 on the date of declaration and $12 on the date of payment. Also, assume the cash dividends were not paid on the additional shares of stock from the stock dividend. For a compound transaction, if an amount box does not require an entry, leave it blank or enter "0".
Nov. 12
Nov. 29
Nov. 29
Explanation / Answer
Question 28
Exercise 10-25
Part a:
Annual dividend on preferred stock = Preferred stocks outstanding x par value per share x dividend rate
= 20,000 x $12 x 5%
= 12,000
The company has not paid any dividend to preferred stockholders in last 3 years that means they have to pay dividend for all four year at this time.
Dividend distributed to preferred stock holders = $12,000 x 4
= $48000
Rest of the dividend would be paid to the common stockholders:
Dividend distributed to common stock holders = $90,000 -$48,000
= $42,000
Part b:
Journal entry for dividend declaration:
Dividend to common stockholders - Debit $42000
Dividend to Preferred stockholders - Debit $48000
Dividend payable – credit $90,000
Part c:
Since preferred stock is noncumulative, dividend for previous years will not be paid they will get dividend for this year only.
Dividend distributed to preferred stock holders = $12,000 x 1
= $12,000
Rest of the dividend would be paid to the common stockholders:
Dividend distributed to common stock holders = $90,000 -$12,000
= $78,000
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