On January 1, 2015, Grant Corporation had the following stockholders\' equity ac

Question

On January 1, 2015, Grant Corporation had the following stockholders' equity accounts:

Common Stock ($5 par value, 50,000 shares issued and outstanding) $250,000

Paid-in Capital in Excess of Par Value 650,000

Retained Earnings 500,000

During the year, the following transactions occurred:

Feb. 1: Declared a $.25 cash dividend per share to stockholders of record on February 15, payable March 1.

Mar. 1: Paid the dividend declared in February.

July 1: Declared a 5% stock dividend to stockholders of record on July 15, distributable July 31. On July 1, the market price of the stock was $20 per share.

July 31: Issued the shares for the stock dividend.

Dec. 1: Declared a $0.30 per share dividend to stockholders of record on December 15, payable January 1, 2016.

Dec. 31: Determined that net income for the year was $390,000. (Prepare the closing entry).

Instructions: Part 1: Prepare journal entries for each of the above transactions

Part 2: Prepare a Stockholders’ Equity Section of the Balance Sheet in Good Form

Explanation / Answer

2015 Account Title and explanation Debit($) Credit($) Feb-01 Retained earnings 12500 Cash Dividend payable 12500 (Declared a $.25 cash dividend per share to stockholders) Mar-01 Cash Dividend payable 12500 cash 12500 (Paid the dividend declared in February) Jul-01 Retained earnings 50000 Stock Dividend distributable 12500 Paid in capital in eacess of par-common stock 37500 (Declared a 5% stock dividend to stockholders ) Jul-31 stock Dividend distributable 12500 Common stock 12500 (Issued the shares for the stock dividend) Dec-01 Retained earnings 15750 Cash Dividend payable 15750 (Declared a $0.30 per share dividend to stockholders) Dec-31 Income summary 390000 Retained earnings 390000 (closing entry) Stockholders' equity as on Dec31, 2015 Common stock at $5 par, 52500 issued $ 2,62,500 Paid in capital in excess of par-common stock $ 6,87,500 Total paid up capital $   9,50,000 Retained earnings: beginning balance $ 5,00,000 add: net income $ 3,90,000 available for dividend $ 8,90,000 Less dividend declared and paid $     78,250 Ending balance of retained earnings $   8,11,750 Total stock holders' equity $ 17,61,750

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