Corporations: Dividends, Retained Earnings, and income Reporting

On January 1, 2020, Geffrey Corporation had the following stockholders equity accounts.

During the year, the following transactions occurred..

Instruction

1. Journalize the transactions and the closing entry for net income and dividends.
2. Enter the beginning balances, and post the entries to the stockholders' equity accounts.
3. Prepare the stockholders' equity section at December 31.

Solution

The stockholders equity accounts of Kerp Company at January 1, 2020, are as follows

There were no dividends in arrears on preferred stock. During 2020, the company had the following transactions and events.

Instruction

1. Journalize the transactions and the closing entry for net income and dividends.
2. Enter the beginning balances, and post the entries to the stockholders' equity accounts.
3. Prepare a retained earnings statement for the year.
4. Prepare the stockholders' equity section at December 31, 2020.

Solution

The post-closing trial balance of Storey Corporation at December 31, 2020, contains the following stockholders equity accounts

A review of the accounting records reveals the following.

1. No errors have been made in recording 2020 transactions or in preparing the closing entry for net income.
2. Preferred stock is $50 par, 6%, and cumulative; 15,000 shares have been outstanding since January 1, 2019.
3. Authorized stock is 20,000 shares of preferred, 500,000 shares of common with a $10 par value.
4. The January 1 balance in Retained Earnings was $1,170,000.
5. On July 1, 20,000 shares of common stock were issued for cash at $16 per share.
6. On September 1, the company discovered an understatement error of $90,000 in computing salaries and wages expense in 2019. The net of tax effect of $63,000 was properly debited directly to Retained Earnings.
7. A cash dividend of $250,000 was declared and properly allocated to preferred and common stock on October 1. No dividends were paid to preferred stockholders in 2019.
8. On December 31, a 10% common stock dividend was declared out of retained earrings on common stock when the market price per share was $16
9. Net income for the year was $585,000
10. On December 31, 2020, the directors authorized disclosure of a $200,000 restriction of retained earnings for plant expansion. (Use Note x.)

Instruction

1. Reproduce the Retained Earnings account (T-account) for 2020.
2. Prepare a retained earnings statement for 2020.
3. Prepare a stockholders' equity section at December 31, 2020.
4. Compute the allocation of the cash dividend to preferred and common stock.

Solution

On January 1, 2020, Ven Corporation had the following stockholders equity accounts

During the year, the following transactions occurred.

Instruction

Prepare the stockholders' eqity section of the balance sheet at

1. March 31
2. June 30
3. September 31
4. December 31, 2020

Solution

On January 1, 2020, Shellenburger Inc. had the following stockholders' equity account balances.

During 2020, the following transactions and events occurred.

1. Issued 50,000 shares of common stock as a result of a 10% stock dividend declared on December 15, 2019.
2. Issued 30,000 shares of common stock for cash at $6 per share
3. Corrected an error that have understated the net income for 2018 by $70,000.
4. Declared and paid a cash dividend of $80,000.
5. Earned net income of $300,000

Instruction

Prepare the stockholders' equity section of the balance sheet at December 31, 2020.

Solution

On January 1, Guillen Corporation, had 95,000 shares of no-par common stock issued and outstanding. The stock has a stated value of $5 per share. During the year, the following occurred.

Instruction

1. Prepare the entries to record these transactions
2. How are dividends and dividends payable reported in the financial statements prepared at December 31?

Solution

Knudsen Corporation was organized on January 1, 2019. during its first year, the corporation issued 2,000 shares of $50 par value preferred stock and 100,000 shares of $10 par value common stock. At December 31, the company declared the following cash dividends: 2019, $5,000; 2020, $12,000; and 2021, $28,000.

Instructions

1. Show the allocation of dividends to each class of stock, assuming the preferred stock dividend is 6% and noncumulative.
2. Show the allocation of dividends to each class of stock, assuming the preferred stock dividend is 7% and noncumulative.
3. Journalize the declaration of the cash dividend at December 31, 2021, under part (b).

Solution

On January 1, 2019, Frontier Corporation had $1,000,000 of common stock outstanding that was issued at par: It also had retained earnings of $780,000. The company issued 40,000 shares of common stock at par on July 1 and earned net income of $400,00 for the year.

Instruction

1. Par value is $10, and market price is $18.
2. Par value is $5, and market price is $20.

Solution

On October 31, the stockholders equity section of Heins Company consists of common stock $500,000 and retained earnings $900,000. Heins is considering the following two courses of action. (1) declaring a 5% stock dividend on the 50,000, $10 par value shares outstanding, or (2) effecting a 2-for-1 stock split that will reduce par value to $5 per share. The current market price is $14 per share.

Instructions

Prepare a tabular summary of the effects of the alternative action on the components of stockholders' equity, outstanding shares, and par value per share. Use the following column headings: Before Action, After Stock Dividend, and After Stock Split.

Solution

On October 1, Little Bobby Corporation's stockholders equity is as follows.

On October 1, Little Bobby declares and distributes a 10% stock dividend when the market price of the stock is $15 per share

Instructions

1. Compute the par value per share (1) before the stock dividend and (2)after the stock dividend.
2. Indicate the balances in the three stockholders' equity accounts after the stock dividend shares have been distributed..

Solution