Listed below are the transactions that affected the shareholders’ equity of BLT

Question

Listed below are the transactions that affected the shareholders’ equity of BLT Corporation during the period 2013 - 2015. At December 31, 2012, the corporation’s accounts included:

                                                                                                          ($ in 000s)

Common stock, 315 million shares at $1 par, .............       $315,000
Paid-in capital – excess of par......................................      1,890,000
Retained earnings..........................................................      2,910,000

a. November 2, 2013, the board of directors declared a cash dividend of $.80 per share on its common shares, payable to shareholders of record November 16, to be paid December 2.

b. On March 3, 2014, the board of directors declared a property dividend consisting of bonds of Blair County that BLT was holding as an investment. The bonds had a fair market value of $4.8 million, but were purchased two years previously for $3.9 million. Because they were intended to be held to maturity, the bonds had not been previously written up. The property dividend was payable to shareholders of record March 14, to be distributed April 6.

c. On July 13, 2014, the corporation declared and distributed a 5% common stock dividend (when the market value of the common stock was $21 per share). Cash was paid for fractional share rights representing 750,000 equivalent whole shares.

d. On November 2, 2014, the board of directors declared a cash dividend of $.80 per share on its common shares, payable to shareholders of record November 16, to be paid December 2.

e. On January 16, 2015, the board of directors declared and distributed a 3 for 2 stock split effected in the form of a 50% stock dividend when the market value of the common stock was $23 per share.

f. On November 2, 2015, the board of directors declared a cash dividend of $.65 per share on its common shares, payable to shareholders of record November 16, to be paid December 2.

Required:

1.   Prepare the journal entries that BLT recorded during the three-year period for these transactions.

2.   Prepare comparative statements of shareholders' equity for BLT for the three-year period ($ in 000s). Net income was $990 million, $1,185 million, and $1,365 million for 2013, 2014, and 2015, respectively.

Explanation / Answer

1) 315 million shares@.80 = $25200000 Nov2,2013 Retained earnings $252,000,000 to dividend payable $252,000,000 Dec2,2013 Dividend paayble $252,000,000 To cash $252,000,000 2)investment in Blair county bonds 3-Mar-14 Investment in warner bond(4.8m - 3.9m) $900,000            To Gain on appreciation of investments $900,000 Retained earnings $4,800,000           To Property dividend payable $4,800,000 4/6    Property dividend paayble $4,800,000         To investment in warner bonds $4,800,000 c)The number of shares represented by the stock divivdend is $15,750,000( 5% *315 m) .If cash is paid in lieu of fractional shares represnting 750,000 equivalent shares then 15,00,000 shares will be distributed ( 15,750,000 - 750,000) Retained earnings (15750000*$21) $330,750,000 To common stock(1500000 *1) $1,500,000.00 Paid in capital excess of par (5000,000*19) $313,500,000.00 Cash (750,000@21) $15,750,000.00 d) on nov 2 , 316.5 Million shares of common stock are outstanding (315 +1.5). therefore the amount of the dividend to be paid is $284.85 million (.90*316.5 Million) Nov2,2013 Retained earnings $28,485,000 to dividend payable $28,485,000 Dec2,2013 Dividend paayble $28,485,000 To cash $28,485,000 e)3 for 2 stock split effected in the form of 50%stock dividend when market value of the common stock was $23 per share Small stock dividends (or =25%) are recorded on the stock par value , so in this case (50% *316.5 Million) Retained earings(316500000 @1) $31,650,000 Common stock $31,650,000 OR Paid in capital excess of par $31,650,000 To common stock $31,650,000 f)cash dividend of $.65 per share On nov 2 , the corpeoration had 474.80 Million shares outstanding (316.5 million+ 158.30) = 474.80 Million *0.75 11/2 Retained earnings $356,100,000 dividend payable 356,100,000 12/2 dividend payable $356,100,000         To cash 356,100,000

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