On October 1, 2016, Nicklaus Corporation receives permission to replace its $1 p
ID: 2501096 • Letter: O
Question
On October 1, 2016, Nicklaus Corporation receives permission to replace its $1 par value common stock (6,000,000 shares authorized, 4,000,000 shares issued, and 3,800,000 shares outstanding) with a new common stock issue having a $.50 par value. Since the new par value is one-half the amount of the old, this represents a 2-for-1 stock split. That is, the shareholders will receive two shares of the $.50 par stock in exchange for each share of the $1 par stock they own. The $1 par stock will be collected and destroyed by the issuing corporation.
On November 1, 2016, the Nicklaus Corporation declares a $0.19 per share cash dividend on common stock and a $0.36 per share cash dividend on preferred stock. Payment is scheduled for December 1, 2016, to shareholders of record on November 15, 2016.
On December 2, 2016, the Nicklaus Corporation declares a 1% stock dividend payable on December 28, 2016, to shareholders of record on December 14. At the date of declaration, the common stock was selling in the open market at $15 per share. The dividend will result in 76,000 (0.01 × 7,600,000) additional shares being issued to shareholders.
Prepare journal entries to record the declaration and payment of these stock and cash dividends. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
Prepare the December 31, 2016, shareholders' equity section of the balance sheet for the Nicklaus Corporation. (Assume net income for the fourth quarter was $2,800,000.)
Prepare a statement of shareholders' equity for Nicklaus Corporation for 2016. (Amounts to be deducted should be indicated with a minus sign. Enter your answers in thousands.)
Part C
On October 1, 2016, Nicklaus Corporation receives permission to replace its $1 par value common stock (6,000,000 shares authorized, 4,000,000 shares issued, and 3,800,000 shares outstanding) with a new common stock issue having a $.50 par value. Since the new par value is one-half the amount of the old, this represents a 2-for-1 stock split. That is, the shareholders will receive two shares of the $.50 par stock in exchange for each share of the $1 par stock they own. The $1 par stock will be collected and destroyed by the issuing corporation.
On November 1, 2016, the Nicklaus Corporation declares a $0.19 per share cash dividend on common stock and a $0.36 per share cash dividend on preferred stock. Payment is scheduled for December 1, 2016, to shareholders of record on November 15, 2016.
On December 2, 2016, the Nicklaus Corporation declares a 1% stock dividend payable on December 28, 2016, to shareholders of record on December 14. At the date of declaration, the common stock was selling in the open market at $15 per share. The dividend will result in 76,000 (0.01 × 7,600,000) additional shares being issued to shareholders.
Explanation / Answer
Par value before= $ 1 Par valueafter stock split= $ 0.5 exising number of equity shares outstanding= 3800000 shares outstanding after stock split=3800000*2=7600000 1-Nov Journal entry for cash dividend on common stock declared: Debit Credit Retained earnings (7600000*0.19) $1,444,000 To Dividend payable on common stock $1,444,000 1-Nov Journal entry for cash dividend on preferred stock declared: Since number of preferred stock is not givn, it is assumed that number of common stock outstanding= number of preferrd stock outstanding=3800000 Retained earnings (7600000*0.36) $2,736,000 To Dividend payable on preferred stock $2,736,000 1-Dec Journal entry for cash dividend on common stock paid: Dividend payable on common stock $1,444,000 To cash $1,444,000 1-Dec Journal entry for cash dividend on preferred stock paid: Dividend payable on preferred stock $2,736,000 To cash $2,736,000 2-Dec Declaration of stock dividend Number of shares = 7600000 Stock dividend = 1%=7600000 shares * 1% = 76000 Retained earnings (76000* 15) $1,140,000 To Common stock(76000* 0.5) $38,000 To Additional paid in capital (76000* 14.5) $1,102,000 Share holders equity Preferred Stock (7600000*0.5) $3,800,000 Common stock (7600000*0.5) $3,800,000 Retained earnings(2800000-2736000-1444000- 1140000) ($2,520,000) Total Share holders equity $5,080,000 Statement of Shareholders equity for 2016 Balance at the beginning of the period $7,600,000 (3800000+3800000) Issue of Shares (Stock dividend) $38,000 Additional paid in capital $102,000 Repurchase of shares - Net Income $2,800,000 Dividends paid (2376000+1444000) ($3,820,000) Balance at the end of the period $6,720,000
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