On January 1, 2017, Chen Corporation had the following stockholders’ equity acco

Question

On January 1, 2017, Chen Corporation had the following stockholders’ equity accounts. Common Stock ($5 par value, 200,000 shares issued and outstanding) $1,000,000 Paid-in Capital in Excess of Par—Common Stock 200,000 Retained Earnings 840,000 During the year, the following transactions occurred. Jan. 15 Declared a $1 cash dividend per share to stockholders of record on January 31, payable February 15. Feb. 15 Paid the dividend declared in January. Apr. 15 Declared a 10% stock dividend to stockholders of record on April 30, distributable May 15. On April 15, the market price of the stock was $15 per share. May 15 Issued the shares for the stock dividend. July 1 Announced a 2-for-1 stock split. The market price per share prior to the announcement was $17. (The new par value is $2.50.) Dec. 1 Declared a $0.50 per share cash dividend to stockholders of record on December 15, payable January 10, 2018. 31 Determined that net income for the year was $250,000. Instructions (a) Journalize the transactions and the closing entries for net income and dividends. (b) Enter the beginning balances, and post the entries to the stockholders’ equity accounts. (Note: Open additional stockholders’ equity accounts as needed.) (c) Prepare a stockholders’ equity section at December 31.

Explanation / Answer

Date Particulars Dr/Cr Dr Amount Cr Amount 15-Jan Retained Earnings Dr    200,000.00 To Dividend Payable Cr    200,000.00 15-Feb Dividend Payable Dr    200,000.00    To Cash/ Bank Cr    200,000.00 15-Apr Retained Earnings Dr    100,000.00 To Stock Dividend Payable Cr    100,000.00 15-May Stock Dividend Payable Dr    100,000.00    To Common Paid up capital Cr      33,330.00    To Paid in Capital in excess of par Cr      66,670.00 (Being 6667 shares issued for the stock dividend) 1-Jul Memorandum entry ( 206,667 Shares of 5$ divided into 310,000 shares of 2.5$ each) 1-Dec Retained Earnings Dr    155,000.00 To Dividend Payable Cr    155,000.00 (0.50 Dividend per share on 310000 shares) 10-Jan Dividend Payable Dr    155,000.00    To Cash/ Bank Cr    155,000.00 31-Dec Net Income Dr    250,000.00 To Retained Earnings Cr    250,000.00

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