Listed below are the transactions that affected the shareholders’ equity of Bran
ID: 2554919 • 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:
November 1, 2018, the board of directors declared a cash dividend of $0.80 per share on its common shares, payable to shareholders of record November 15, to be paid December 1.
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 $2.4 million, but were purchased two years previously for $2.1 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.
On July 12, 2019, the corporation declared and distributed a 6% common stock dividend (when the market value of the common stock was $16 per share). Cash was paid in lieu of fractional shares representing 540,000 equivalent whole shares.
On November 1, 2019, the board of directors declared a cash dividend of $0.80 per share on its common shares, payable to shareholders of record November 15, to be paid December 1.
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 dividend when the market value of the common stock was $17 per share.
On November 1, 2020, the board of directors declared a cash dividend of $0.65 per share on its common shares, payable to shareholders of record November 15, to be paid December 1.
Required:
1. Prepare the journal entries that Branch-Rickie recorded during the three-year period for these transactions.
2. Prepare comparative statements of shareholders’ equity for Branch-Rickie for the three-year period. Net income was $375 million, $440 million, and $500 million for 2018, 2019, and 2020, respectively.
Explanation / Answer
Journal Entries:-
01/11/2018 – Retained Earnings A/c …………Dr $87,200,000 (109,000,000 * 0.80)
To Dividends Payable A/c$87,200,000
Declared 0.80 cash dividend.
01/12/18 – Dividends Payable A/c………….Dr $87,200,000
To Cash A/c$87,200,000
Paid the dividend declared.
Shareholders Equity Statement - 2018
Particulars
Common Stock
Paid In Capital – Excess of Par
Retained Earnings
Total Stockholders’ Equity
Balance on Jan 18
$109,000,000
$654,000,000
$880,000,000
$ 1,643,000,000
(-) Cash Dividend
$87,200,000
$87,200,000
+ Net Income
$375,000,000
$375,000,000
Balance on December 18
$109,000,000
$654,000,000
$1,167,800,000
$1,930,800,000
01/03/2019 – Marketable Bonds A/c …………Dr $300,000(2.4M – 2.1M)
To Gain on Marketable Bonds A/c $300,000
Increase in bonds market value.
01/03/2019 – Retained Earnings A/c ……………Dr $2,400,000
To Bonds Dividend Payable A/c$2,400,000
Retained earnings used to declare dividends.
05/04/2019 - Dividend Payable A/c………Dr $2,400,000
To Marketable Bonds A/c$2,400,000
Bonds dividend paid to shareholders.
12/07/2019 – Number of new shares for stock dividend – 109 M shares * 6% = 6,540,000 shares
12/07/2019 - Retained Earnings A/c…………….Dr $104,640,000 (6,540,000 * 16)
To Common Stock Dividend Distributable A/c $6,540,000
To Paid in Capital in Excess of Par A/c$98,100,000
Stock dividend distributable.
12/07/2019 – Common Stock Dividend Distributable A/c ……………Dr $6,540,000
To Common Stock A/c$6,000,000
To Cash A/c$540,000
Dividend paid.
01/11/2019 – Retained Earnings A/c …………Dr $92,000,000 (115,000,000 * 0.80)
To Dividends Payable A/c$92,000,000
Declared 0.80 cash dividend.
01/12/19 – Dividends Payable A/c………….Dr $92,000,000
To Cash A/c$92,000,000
Paid the dividend declared.
Shareholders Equity Statement - 2018
Particulars
Common Stock
Paid In Capital – Excess of Par
Retained Earnings
Total Stockholders’ Equity
Balance on December 18
$109,000,000
$654,000,000
$1,167,800,000
$1,930,800,000
(-)Bonds Dividend Payable
$2,400,000
$2,400,000
(-)Stock Dividend
$104,640,000
$104,640,000
(+) Stock Dividend
$6,000,000
$98,100,000
$104,100,000
(-) Cash Dividend
$92,000,000
$92,000,000
(+) Net Income
$500,000,000
$500,000,000
Balance as on Dec 2019
$115,000,000
$752,100,000
$1,468,760,000
$2,335,860,000
Particulars
Common Stock
Paid In Capital – Excess of Par
Retained Earnings
Total Stockholders’ Equity
Balance on Jan 18
$109,000,000
$654,000,000
$880,000,000
$ 1,643,000,000
(-) Cash Dividend
$87,200,000
$87,200,000
+ Net Income
$375,000,000
$375,000,000
Balance on December 18
$109,000,000
$654,000,000
$1,167,800,000
$1,930,800,000
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