Listed below are the transactions that affected the shareholders\' equity of Bra
ID: 2551025 • Letter: L
Question
Listed below are the transactions that affected the shareholders' equity of Branch-Rickie Corporation during the period 2018-2020. At December 31, 2017, the corporation's accounts included Common stock, 112 million shares at $1 par Paid-in capital-excess of par Retained earnings (in 000s) 112,000 672,000 910,000 a. November 1, 2018, the board of directors declared a cash dividend of $0.70 per share on its common shares, payable to shareholders of record November 15, to be paid December 1 b. On March 1, 2019, the board of directors declared a property dividend consisting of corporate bonds of Warner Corporation that Branch-Rickie was holding as an investment. The bonds had a fair value of $2.8 million, but were purchased two years previously for $2.4 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 13, to be distributed April 5 C. On July 12, 2019, the corporation declared and distributed a 4% common stock dividend (when the market value of the common d. On November 1, 2019, the board of directors declared a cash dividend of $0.70 per share on its common shares, payable to e. On January 15, 2020, the board of directors declared and distributed a 3-for-2 stock split effected in the form of a 50% stock f. On November 1, 2020, the board of directors declared a cash dividend of $0.55 per share on its common shares, payable to stock was $19 per share). Cash was paid in lieu of fractional shares representing 480,000 equivalent whole shares shareholders of record November 15, to be paid December 1 dividend when the market value of the common stock was $20 per share shareholders of record November 15, to be paid December 1Explanation / Answer
1)
a) Declaration of divident on 1st Nov 2018
Retained Earnings A/c Dr $78,400,000
To Cash Dividend Payable A/c Cr $78,400,000
On 1st of December 2018 the dividend was paid so the journal will be as below
Cash Dividend Payable A/c Dr $78,400,000
To Cash A/c Cr $78,400,000
Please be noted no entry to be recorded on the date of record. A financial transaction occur both on the date of declaration of divident when the liability is recorded and on the date of payment when the amount is paid.
b) On March 1 2019 the board of director declared a property dividend, a property dividend is payable in non monetary assets rather than cash. In case of property divident first the property (here i.e Bond) is restated at the fair market value and gain or loss is recognised
Investment in Warner Bonds A/c Dr $400,000
To Gain on appreciation of bonds A/c Cr $400,000
( since bond value is restated to the current market price)
Retained earnings A/c Dr $2,800,000
To Property dividend Payable A/c $2,800,000
Nothing to be recorded on March 15, however on April 5 when it is distributed the following entry to be recorded
Property divident payable A/c Dr $2,800,000
To Investment in Warner Bonds A/c Cr$ 2,800,000
C) On July 12 the corporation declared a 4% common stock dividend i.e $112,000,000*4%=4,480,000 shares
Retained earning A/c Dr $85,120,000 (4,480,000*19)
Common Stock A/c Cr $ 4,000,000
Paid in capital A/c Cr $72,000,000
Cash A/c Cr $ 9,120,000
(For 480,000 equivalent of shares the cash was paid so 480,000*19)
d) On November 1,2019 the corporation declared dividend. The total share will be 112,000,000+ 4,000,000 i.e the common stock dividend declared on July 12
entry will be same as posted on november 1 2018 however the amount would change
1 November 2019
Retained earnings A/c Dr $81,200,000
Cash Dividend payable a/c Cr $81,200,000
On December 1 2019
Cash Dividend Payable A/c Dr $81,200,000
To Cash A/c Cr $81,200,000
No entry be be recorded on November 15
e) Paid in capital -excess of par A/c Dr 58,000,000
To common stock A/c Cr 58,000,000
(116,000,000*.50=58,000,000)
f) 1st November 2020 declared a cash dividend, now the number of share is (112,000,000+4000,000+58,000,000)
Retained earning A/c Dr 95,700,000
To Cash dividend payable A/c Cr 95,700,000
1st December
Cash dividend payable A/c Dr 95,700,000
To Cash A/c Cr 95,700,000
2) The below table is in thousand "000"
Please let me know if you have any further query. Hope I have explained it well. Have a Good Day!
Particular common stock additional capital retained earnings total shareholder equity Jan 1 2018 112,000 672,000 910,000 1,694,000 Net income 390,000 390,000 cash dividends (78,400) (78,400) Dec 31,2018 112,000 672,000 1,221,600 2,005,600 Property dividend (2,800) (2,800) Common stock Dividend 4,000 72,000 (85,120) (9,120) Net Income 455,000 455,000 Cash Dividends (81,200) (81,200) Dec 31, 2019 116,000 744,000 1,507,480 2,367,480 3 for 2 split effected in the form of stock dividend 58,000 (58,000) 0 Net income 515,000 515,000 Cash dividends (95,700) (95,700) Dec 31,2020 174,000 686,000 1,926,780 2,786,780Related Questions
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