Date Account Titles and Explanation Debit Credit (To close net income) (To close

Question

Date

Account Titles and Explanation

Debit

Credit

(To close net income)

(To close stock dividends)

(To close cash dividends)

Common Stock

Date

Explanation

Ref

Debit

Credit

Balance

Balance

?

Adjusting

Common Stock Dividends Distributable

Date

Explanation

Ref

Debit

Credit

Balance

Paid-in Capital in Excess of Par—Common Stock

Date

Explanation

Ref

Debit

Credit

Balance

Balance

?

Retained Earnings

Date

Explanation

Ref

Debit

Credit

Balance

Balance

?

Net income

Stock dividend

Cash dividend

Cash Dividends

Date

Explanation

Ref

Debit

Credit

Balance

Stock Dividends

Date

Explanation

Ref

Debit

Credit

Balance

On January 1, 2017, Geffrey Corporation had the following stockholders’ equity accounts.
Common Stock ($20 par value, 66,000 shares issued and outstanding) $1,320,000 Paid-in Capital in Excess of Par—Common Stock 205,000 Retained Earnings 603,000
During the year, the following transactions occurred.
Feb. 1 Declared a $3 cash dividend per share to stockholders of record on February 15, payable March 1. Mar. 1 Paid the dividend declared in February. Apr. 1 Announced a 2-for-1 stock split. Prior to the split, the market price per share was $40. July 1 Declared a 10% stock dividend to stockholders of record on July 15, distributable July 31. On July 1, the market price of the stock was $14 per share. 31 Issued the shares for the stock dividend. Dec. 1 Declared a $0.50 per share dividend to stockholders of record on December 15, payable January 5, 2018. 31 Determined that net income for the year was $340,000.

Explanation / Answer

1-Feb Retained earnings Dr 198000               Dividend payable Cr 198000 ( To record cash dividend declared) 1-Mar Dividend payable Dr 198000              Cash Cr 198000 ( To record payment of cash dividend) 1-Apr Memo entry - as no change in the total value as for stock split number of shares double and par value becomes half hence now shares are 66000*2 = 132000 Par value = 20/2 = $ 10 1-Jul Retained earnings Dr 184800 (132000 * 10% * 14)          Common stock dividend distributable Cr 132000 ( 132000 * 10% *10)           Paid in capital in excess of par - common stock Cr 52800 ( 132000 * 10% *4) ( To record stock dividend declared) 31-Jul Common stock dividend distributable Dr 132000             Common stock Cr 132000 ( To record stock dividend issued) 1-Dec Retained earnings Dr 72600 ( 132000+13200) * 0.5               Dividend payable Cr 72600 ( To record cash dividend declared) 31-Dec-17 Common stock ( $ 10 par value , 145200 shares issued and outstanding) 1452000 Paid in capital in excess of par - common stock ( 205000 + 52800) 257800 Retained earnings ( 603000 + 340000 - 72600 - 184800 - 198000) 487600 Stockholders equity 2197400 Common stock - working Number Par value Value opening Opening balance 66000 20 1320000 after stock spli 2:1 132000 10 1320000 after Stock dividend 10% 145200 10 1452000

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