Before preparing financial statements for the current year, the chief accountant

Question

Before preparing financial statements for the current year, the chief accountant for Springer Company discovered the following errors in the accounts.
The declaration and payment of $50,000 cash dividend was recorded as a debit to Interest Expense $50,000 and a credit to Cash $50,000.
A 10% stock dividend (1,000 shares) was declared on the $10 par value stock when the market value per share was $16. The only entry made was: Retained Earnings (Dr.) $10,000 and Dividend Payable (Cr.) $10,000. The shares have not been issued.
A 4-for-1 stock split involving the issue of 400,000 shares of $5 par value common stock for 100,000 shares of $20 par value common stock was recorded as a debit to Retained Earnings $2,000,000 and a credit to Common Stock $2,000,000.
Prepare the correcting entries at December 31. (For multiple debit/credit entries, list amounts from largest to smallest e.g. 10, 5, 3, 2.)

Explanation / Answer

The declaration and payment of $50,000 cash dividend was recorded as a debit to Interest Expense $50,000 and a credit to Cash $50,000. How the entry was made: Dr Interest Expense 50,000 Cr Cash 50,000 How it should have been made: Dr Retained Earnings 50,000 Cr Cash 50,000 The correcting entry would be: Dr Retained Earnings 50,000 Cr Interest Expense 50,000 A 10% stock dividend (1,000 shares) was declared on the $10 par value stock when the market value per share was $16. The only entry made was: Retained Earnings (Dr.) $10,000 and Dividend Payable (Cr.) $10,000. The shares have not been issued. How the entry was made: Dr Retained Earnings 10,000 Cr Dividend Payable 10,000 How it should have been made: Dr Retained Earnings 16,000 Cr Common Stock Distributable 10,000 Cr Paid-In Capital in Excess of Par, Common Stock 6,000 The correcting entry would be: Dr Retained Earnings 6,000 Dr Dividend Payable 10,000 Cr Common Stock Distributable 10,000 Cr Paid-In Capital in Excess of Par, Common Stock 6,000 A 4-for-1 stock split involving the issue of 400,000 shares of $5 par value common stock for 100,000 shares of $20 par value common stock was recorded as a debit to Retained Earnings $2,000,000 and a credit to Common Stock $2,000,000. How the entry was made: Dr Retained Earnings 2,000,000 Cr Common Stock 2,000,000 How it should have been made: There should have been no entry The correcting entry would be: Dr Common Stock 2,000,000 Cr Retained Earnings 2,000,000

Related Questions

Navigate

• Browse (All)
• Browse B
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.