(a) Common Stock Date Explanation Ref. Debit Credit Balance Common Stock Dividen
ID: 2429626 • Letter: #
Question
(a)
Common Stock
Date
Explanation
Ref.
Debit
Credit
Balance
Common Stock Dividends Distributable
Date
Explanation
Ref.
Debit
Credit
Balance
Paid-in Capital in Excess of Par Value—Common Stock
Date
Explanation
Ref.
Debit
Credit
Balance
Retained Earnings
Date
Explanation
Ref.
Debit
Credit
Balance
Cash dividends
Net income
Cash Dividends
Date
Explanation
Ref.
Debit
Credit
Balance
Stock Dividends
Date
Explanation
Ref.
Debit
Credit
Balance
On January 1, 2019, Larkspur, Inc. had the following stockholders' equity accounts.Common Stock ($10 par value, 78,300 shares issued and outstanding) $783,000 Paid-in Capital in Excess of Par Value-Common Stock 199,000 Retained Earnings 593,000
During the year, the following transactions occurred.
Jan. 15 Declared a $1.10 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 5% stock dividend to stockholders of record on April 30, distributable May 15. On April 15, the market price of the stock was $16 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 $14. (The new par value is $5.) Dec. 1 Declared a $0.50 per share cash dividend to stockholders of record on December 15, payable January 10, 2020. Dec. 31 Determined that net income for the year was $225,000.
Explanation / Answer
Date
General Journal
Debit
Credit
Jan. 15
Dividend (78300 x $1.10)
86130
Dividends payable
86130
Feb. 15
Dividends payable
86130
Cash
86130
Apr. 15
Retained earnings (5% x 78300 x $16)
62640
Common stock dividend distributable (5% x 78300 x $10)
39150
Paid-in capital in excess of par value-common stock
23490
May. 15
Common stock dividend distributable
39150
Common stock
39150
Jul. 1
No Entry
0
No Entry
0
Dec. 1
Dividend [(78300 + 3915) x $0.50)
41107.50
Dividends payable
41107.50
Dec. 31
Income summary
225000
Retained earnings
225000
Dec. 31
Retained earnings
127237.50
Dividend ($86130 + $41107.50)
127237.50
Dec. 31
No Entry
0
No Entry
0
Note: No entry is recorded for the stock split but only a memo entry reducing par value of common stock & increasing number of common shares outstanding.
No entry is required for closing stock dividend as same is directly debited to retained earnings at time of declaration itself.
Date
General Journal
Debit
Credit
Jan. 15
Dividend (78300 x $1.10)
86130
Dividends payable
86130
Feb. 15
Dividends payable
86130
Cash
86130
Apr. 15
Retained earnings (5% x 78300 x $16)
62640
Common stock dividend distributable (5% x 78300 x $10)
39150
Paid-in capital in excess of par value-common stock
23490
May. 15
Common stock dividend distributable
39150
Common stock
39150
Jul. 1
No Entry
0
No Entry
0
Dec. 1
Dividend [(78300 + 3915) x $0.50)
41107.50
Dividends payable
41107.50
Dec. 31
Income summary
225000
Retained earnings
225000
Dec. 31
Retained earnings
127237.50
Dividend ($86130 + $41107.50)
127237.50
Dec. 31
No Entry
0
No Entry
0
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