Analyzing and Identifying Financial Statement Effects of Dividends The stockhold

Question

Analyzing and Identifying Financial Statement Effects of Dividends The stockholders equity of Kinney Company at December 31, 2015, is shown below: 5% preferred stock, s100 per value, 10,000 shares authorized; 4,000 shares issued and outstanding Common stock, s5 par value, 200,000 shares authorized; 50,000 shares issued and outstanding Paid-in capitel in excess of per value-preferred stock Paid-in capital in excess of par value-common stock Retained earnings Totel stockholders equity $400000 250,000 40000 300,000 656,000 $1,646,000 The following transactions, among others, occurred during 2016. Apr. 1 Declared and issued a 100% stock dividend on all outstanding shares of common stock. The market value of the stock was $11 per share. Dec. 7 Declared and issued a 396 stock dividend on all outstanding shares of common stock. The market value of the stock was $14 per share Dec. 20 Declared and paid (1) the annual cash dividend on the preferred stock and (2) a cash dividend of 80 cents per common share a. Using the financial statement effects template, illustrate the effects of these transactions. Use negative signs with answers when appropriate. When applicable enter total amount for contributed capital. Balance Sheet Cash Asset + Noncash Assets Liabilities + contrib. Capital + Earned Capital . Contra Equity Declared and paid 1006 stock dividend. Deci red and paid 3% stock dividend Deciared and issued a cosh dvidend b. Prepare the journal entries for these transactions. c. Post the loumal entries from b to the related T-accounts. General Journal Cash Debit Credit 4 Retained carnings Common stock Retained Eanings To record cash dividend 127 Recained earnings Common stock Additional paid in capital Common Stock 12/20 Retained earnings Cosh Additional Paid in Capital d. Prepare a 2016 retained earnings reconcilation assuming that the company reports 2016 net income of $253.000. Do not use negative signs with any of your answers. Kinney Company Statement of Retained Earnings For the Year Ended December 31,2016 Retained cernings, December 31, 2015 Add Net income Less: Cash dividends declared Stock dividends declared Retained earnings, December 31, 2016

Explanation / Answer

Balance Sheet Transaction Cash Asset + Noncash asset = Liabilities + Contr.Capital + Earned Capital - Contra Equity Declared and paid 100% stock dividend + = + 550000 + -550000 - Declared and paid 3% stock dividend + = + 42000 + -42000 - Declared and paid annual cash dividend -102400 + = + + -102400 - Date Acount Title Debit Credit 4/1 Retained earnings 550000 Common stock 250000 Additional paid-in-capital - common stock 300000 (Declaration and payment of 100% stock dividend) 12/7 Retained earnings 42000 Common stock 15000 Additional paid-in-capital - common stock 27000 (Declaration and payment of 3% stock dividend) 12/20 Retained earnings 20000 Cash 20000 12/20 (Declaration and payment of annual preferred dividend) Retained earnings 82400 Cash 82400 (Declaration and payment of cash divinded on commonn stock @$0.80 per share) Common stock Date Debit Credit Date 250000 Beg.Bal. 250000 4/1 15000 12/7 0 515000 515000 End.Bal. Paid-in-capital in excess of par value Common stock Date Debit Credit Date 300000 Beg.Bal. 300000 4/1 27000 12/7 0 627000 627000 End.Bal. Retained Earnings Date Debit Credit Date 4/1 550000 656000 Beg.Bal. 12/7 42000 253000 12/30 12/7 20000 12/20 82400 694400 909000 214600 End.Bal. KINNEY COMPANY Statement of retained earnings Retained earnings as at December 31, 2015 656000 Add: net income 253000 909000 Less: Stock dividend declared 592000            Cash dividend declared 102400 694400 Retained earnings as at December31, 2016 214600

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