Due by 12:20 p.m., Wednesday, April 25. Worth a maximum of fifteen (15) points i

Question

Due by 12:20 p.m., Wednesday, April 25. Worth a maximum of fifteen (15) points if worked correctly. Must show all calculations to receive credit. Journal entries should be in proper format. Should be submitted on Canvas. Can be entered in text box or attachment in Word, Excel, or PDF form. No late work accepted.

Zinnia Company:

Zinnia Company incorporated on January 1, 2017. The company had authorized 1,500,000 shares of common stock, with a par value of $5 per share. The company had the following transactions during 2017:

Jan. 15     Issued 50,000 shares of common stock for $8 per share.

Sept. 1   Repurchased 5,000 shares of their common stock for $7 per share.

Nov. 1      Declared a $.50 per share cash dividend to be paid on Dec. 30 to stockholders of record on Dec. 1.

Required:

1. Prepare the necessary journal entries to record the above transactions. (12 points)

Date

Account Titles

Debit

Credit

2. Assume that Zinnia Company declared a 15% stock dividend on Nov. 1 instead of a cash dividend. If the stock was trading at $10 per share on Nov. 1, what journal entry would the company record on Nov. 1? (3 points)

Date

Account Titles

Debit

Credit

Date

Account Titles

Debit

Credit

Explanation / Answer

Zinnia Company

Date

Account Titles and Explanation

Debit

Credit

15-Jan-17

Cash

$400,000

Common Stcok

$250,000

Paid-in Capital, Common Stock

$150,000

(To record issue of 50,000 shares at $8 = $400,000; par value at $5, = $250,000 and paid-in capital, 50,000 x (8-5) = $150,000)

1-Sep-17

Treasury Stock

$35,000

Cash

$35,000

(To record repurchase of 5,000 shares at $7 per share)

1-Nov-17

Retained Earnings

$22,500

Dividend Payable

$22,500

(To record dividends declared at $0.50 per share, outstanding shares - 45,000 (50,000 -5,000))

30-Dec-17

Dividends Payable

$22,500

Cash

$22,500

(To record dividends paid)

Note: Since the question mentioned the dividend is payable on Dec 30, the entry for payment is recorded on Dec 30, 2017. Alternatively, when the payment date is not mentioned or no information about payment of dividend is given, Dividends Payable is reported as current liability in the balance sheet at the end of the accounting period.

Date

Account Titles and Explanation

Debit

Credit

1-Nov-17

Retained Earnings

$67,500

Common Stock

$33,750

Contributed Capital in excess of Par

$33,750

(15% x 45,000 x ($10 -$5)

(To record issue of 15% stock dividend, market price per share = $10; 45,000 shares x $10 x 15% = $67,500)

The number of outstanding shares = 50,000 – 5,000 (Treasury Stock) = 45,000 shares

The stock dividend is paid by capitalizing retained earnings – 45,000 shares x 15% x $10 = $67,500

The stock dividend is reported at par value of $5 per share as Common Stock – 45,000 x 15% x $5 = $33,750

The excess of market price over par value ($10 - $5) $5 is reported as Contributed Capital in excess of par – 45,000 x15% x $5 = $33,750

Date

Account Titles and Explanation

Debit

Credit

15-Jan-17

Cash

$400,000

Common Stcok

$250,000

Paid-in Capital, Common Stock

$150,000

(To record issue of 50,000 shares at $8 = $400,000; par value at $5, = $250,000 and paid-in capital, 50,000 x (8-5) = $150,000)

1-Sep-17

Treasury Stock

$35,000

Cash

$35,000

(To record repurchase of 5,000 shares at $7 per share)

1-Nov-17

Retained Earnings

$22,500

Dividend Payable

$22,500

(To record dividends declared at $0.50 per share, outstanding shares - 45,000 (50,000 -5,000))

30-Dec-17

Dividends Payable

$22,500

Cash

$22,500

(To record dividends paid)

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