Exercise 18-23 Transactions affecting retained earnings [LO18-6, 18-7, 18-8] The
ID: 2551237 • Letter: E
Question
Exercise 18-23 Transactions affecting retained earnings [LO18-6, 18-7, 18-8]
The balance sheet of Consolidated Paper, Inc., included the following shareholders’ equity accounts at December 31, 2015:
Prepare the appropriate entries for these events. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
On March 3 the board of directors declared a property dividend of 290,000 shares of Leasco International common stock that Consolidated Paper had purchased in January as an investment (book value: $552,000). The investment shares had a fair value of $2 per share and were distributed March 31 to shareholders of record March 15.
On May 3 a 5-for-4 stock split was declared and distributed. The stock split was effected in the form of a 25% stock dividend. The market value of the $1 par common stock was $11 per share.
On July 5 a 1% common stock dividend was declared and distributed. The market value of the common stock was $11 per share.
On December 1 the board of directors declared the 7.5% cash dividend on the 98,000 preferred shares, payable on December 28 to shareholders of record December 20.
On December 1 the board of directors declared a cash dividend of $0.50 per share on its common shares, payable on December 28 to shareholders of record December 20.
Prepare the shareholders' equity section of the balance sheet for Consolidated Paper, Inc. at December 31, 2016. Net income for the year was $880,000. (Negative amounts should be indicated by a minus sign.)
The balance sheet of Consolidated Paper, Inc., included the following shareholders’ equity accounts at December 31, 2015:
Explanation / Answer
Date General Journal Debit Credit a March 3 Investment in Leasco International stock 28000 Gain on appreciation of investment 28000 (290000 * 2 - 552000) Retained earnings 580000 Property dividends payable 580000 March 15 No Entry March 31 Property dividends payable 580000 Investment in Leasco International stock 580000 b May 3 Paid-in capital—excess of par, common* 120000 Common stock(25% x [484,800 –4,800] shares at $1 par) 120000 *alternatively, retained earnings may be debited c July 5 Retained earnings 66000 Common stock 6000 Paid-in capital—excess of par, common (difference) 60000 *1% x [480,000 + 120,000 shares] = 6,000 additional shares d December 1 Retained earnings (98,000 * 7.5%) 7350 Cash dividends payable 7350 December 20 No entry December 28 Cash dividends payable 7350 Cash 7350 e December 1 Retained earnings [(480000 + 66000) * 0.50] 273000 Cash dividends payable 273000 December 20 No Entry December 28 Cash dividends payable 273000 Cash 273000 CONSOLIDATED PAPER, INC. [Shareholders’ Equity section] December 31, 2013 Paid-in capital: Preferred stock, 7.5%, 98,000 shares at $1 par 98,000 Common stock, 463,000 shares at $1 par1 5,50,000 Paid-in capital - excess of par, preferred 15,95,000 Paid-in capital - excess of par, common2 26,45,000 Retained earnings3 9698650 Treasury stock, at cost; 4,800 common shares -52,800 Total shareholders’ equity 9645850 1. 484,400 + 60,000 + 6,000 = 550,000 shares 2. 2,645,000 + 60,000 - 60,000 = 2,645,000 3. $9,745,000 -580,000 -66,000 -7,350 -273,000 + 880,000 = $9,488,580
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