On January 1, 2011, Giants Inc. had the following account balances in its stockh
ID: 2459760 • Letter: O
Question
On January 1, 2011, Giants Inc. had the following account balances in its stockholder's equity accounts:
Preferred Stock, $100 par, 10,000 shares outstanding $1,000,000
Paid-in capital in excesss of par - preferred $ 100,000
Common Stock, $1 par , 250,000 shares issued $250,000
Paid in Capital in excess of par - common $500,000
Retained Earnings $2,000,000
Treasury Stock, at cost, 5000 shares $ 25,000
During 2011, Giants Inc. had the following transactions:
Jan 15: Declared a property dividend of 100,000 shares of Jets Co. (book value , $10 per share, market value $9 per share).
Feb 17: Distributed the property dividend
April 10: a 2-for-1 stock split was declared on outstanding common stock and effected in the form of a stock dividend. The market value of the stock was $4 on this date
July 18: Declared and distributed a 3% stock dividend on outstanding common stock. The market value per share was $5 on this date.
December 1: Declared a fifty cents per share cash dividend on the outstanding common shares.
December 20: Paid the cash dividend.
Required:
A. Record the above transactions and events in journal format.
B. Prepare the stockholder's equity section of Giants Inc. balance sheet as of December 31, 2011. Assume net income is $500,000 for 2011.
Explanation / Answer
Part A)
The journal entries are as follows:
__________
Part B)
The shareholder's equity section is given below:
Date Account Titles Debit Credit 15th January 2011 Loss on Investment (100,000*(10-9)) $100,000 Investment in Jets Co. $100,000 (To record loss on investment in Jets Co.) Retained Earnings (100,000*9) $900,000 Property Dividend Payable $900,000 (To record declaration of property dividend) 17th February 2011 Property Dividend Payable $900,000 Investment in Jets Co. $900,000 (To record distribution of property dividend) 10th Aoril 2011 Retained Earnings ((250,000-5,000)*2*1/2) $245,000 Common Stock $245,000 (To record stock dividend) 18th July 2011 Retained Earnings (490,000*3%*5) $73,500 Common Stock (490,000*3%*1) $14,700 Paid-in-Capital – Excess of Par (490,000*3%*4) $58,800 (To record declaration and distribution of stock dividend) 1st December 2011 Retained Earnings ((490,000 + 3%*490,000)*.50) $252,350 Cash Dividend Payable $252,350 (To record declaration of cash dividend) 20th December 2011 Cash Dividend Payable $252,350 Cash $252,350 (To record payment of cash dividend)Related Questions
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