During 2012, Margan Corporation had the following transactions and events. 1. De

Question

During 2012, Margan Corporation had the following transactions and events.

1. Declared a cash dividend.
2. Issued par value common stock for cash at par value.
3. Completed a 2-for-1 stock split in which $10 par value stock was changed to $5 par value stock.
4. Declared a small stock dividend when the market value was higher than par value.
5. Made a prior period adjustment for overstatement of net income.
6. Issued the shares of common stock required by the stock dividend declaration in item no. 4 above.
7. Paid the cash dividend in item no. 1 above.
8. Issued par value common stock for cash above par value.

Indicate the effect(s) of each of the foregoing items on the subdivisions of stockholders

Explanation / Answer

for accural of interest or due entry in case dividend is paid to prefernce share holders. 1.Proposed Dividend......A/C Dr $800 To Preference share holders a/c $800 2.Transfer proposed dividend to Interim dividend. Proposed dividend a/c Dr $800 To Interim Dividend a/c $800 transfer to interim dividend is required bcoz all the dividend which is proposed cannot be paid by the company to its shareholders in all the cases.Hence a separate Account is opened for this purpose.-Interim Dividend any amount which is not paid which proposed the balance remains in interim dividend a/c. 3.for payment of cash to share holders Interim Dividend a/c Dr $800 To Cash a/c $800.

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