Reporting Stockholders\' Equity The Stockholders\'Equit oblem 13-65 ders Equity
ID: 2422145 • Letter: R
Question
Reporting Stockholders' Equity The Stockholders'Equit oblem 13-65 ders Equity section of Nilsson Corporation's balance sheet as of December 31,2014, is as follows Common stock ($5 par, 500,000 shares authorized, ow mana ud $1,375,000 550,000 Paid-in capital in excess of par Total paid-in capital Unappropriated retained earnings Appropriated retained earnings Total retained earnings $1,925,000 $1,335,000 500,000 1,835,000 $3,760,000 Total stockholders' equity Nilsson Corporation had the following stockholders equity transactions during 201s Jan. 15 Mar. May 18 June 19 uly 31 Paid the dividend. Completed the building renovation, for which $500,000 of retained earnings had been restricted. Paid the contractor $485,000, all of which is capitalized. Issued 100,000 additional shares of the common stock for $8 per share. Declared a dividend of $1.50 per share to be paid on July 31, 2015, to stockholders of record on June 30, 2015 Approved additional building renovation to be funded internally. The estimated cost of the project is $400,000, and retained earnings are to be restricted for that amount. 3 Declared a property dividend to be paid on December 31, 2015, to stockholders of record on November 30, 2015. The dividend is to consist of 35,000 shares of Hampton Inc. stock that are currently recorded in Nilsson's books at $9 per share. The fair market value of the stock on November 12 is $13 per share. Reported $885,000 of net income on the December 31, 2015, income statement. (Assume that revenues and expenses were closed to a temporary account, Income Summary. Use this account to complete the closing process.) In addition, the stock was distributed in satisfaction of the Nov. 12 Dec. 31 property dividend. The Hampton stock closed at $14 per share at the end of the day's trading.Explanation / Answer
Nilsson Corporation
(‘1) Journal Entries
Date
Account Title and Explanation
Debit
Credit
Jan 15
Appropriated retained earnings
500,000
Retained Earnings
500,000
Mar 3
Cash
800,000
Common Stock (100,000 x $5)
500,000
Paid in Capital in excess of par
300,000
May 18
Retained Earnings
562,500
Dividend Payable (375000 x $1.5)
562,500
June 19
Retained Earnings
400,000
Appropriated Retained Earnings
400,000
July 31
Dividend Payable
562,500
Cash
562,500
Nov 12
Retained Earnings (35,000 x $13)
455,000
Dividend Payable
455,000
Nov 12
Investment in Hampton Inc Stock
(35000 x $4)
140,000
Gain on Investment
140,000
Dec 31
Dividend Payable
455,000
Investment in Hampton Inc Stock
455,000
Dec 31
Income Summary
885,000
Retained Earnings
885,000
(‘2) Stockholders’ Equity as at Dec 31,2015
Particulars
Amount
Amount
Common Stock ( $5 par , 500,000 shares authorised , 375,000 issued and outstanding)
1,875,000
Paid in capital in excess of par
850,000
2,725,000
Appropriated retained earnings
400,000
Date
Account Title and Explanation
Debit
Credit
Jan 15
Appropriated retained earnings
500,000
Retained Earnings
500,000
Mar 3
Cash
800,000
Common Stock (100,000 x $5)
500,000
Paid in Capital in excess of par
300,000
May 18
Retained Earnings
562,500
Dividend Payable (375000 x $1.5)
562,500
June 19
Retained Earnings
400,000
Appropriated Retained Earnings
400,000
July 31
Dividend Payable
562,500
Cash
562,500
Nov 12
Retained Earnings (35,000 x $13)
455,000
Dividend Payable
455,000
Nov 12
Investment in Hampton Inc Stock
(35000 x $4)
140,000
Gain on Investment
140,000
Dec 31
Dividend Payable
455,000
Investment in Hampton Inc Stock
455,000
Dec 31
Income Summary
885,000
Retained Earnings
885,000
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