Listed below are the transactions that affected the shareholders\' equity of Bra
ID: 2566012 • Letter: L
Question
Listed below are the transactions that affected the shareholders' equity of Branch-Rickie Corporation during the period 2016-2018. At December 31, 2015, the corporation's accounts included (S in 000s) Common stock, 101 million shares at $1 par$101,000 600,000 800,000 Paid-in capital-excess of par Retained earnings a. November 1, 2016, the board of directors declared a cash dividend of $0.60 per share on its common shares, payable to shareholders of record November 15, to be paid December 1 b. On March 1, 2017, 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 $1.4 million, but were purchased two years previously for $1.2 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, 2017, the corporation declared and distributed a 6% common stock dividend (when the market value of the common stock was $18 per share). Cash was paid in lieu of fractional shares representing 60,000 equivalent whole shares d. On November 1, 2017, the board of directors declared a cash dividend of $0.60 per share on its e. On January 15, 2018, the board of directors declared and distributed a 3-for-2 stock split effected in the f. On November 1, 2018, the board of directors declared a cash dividend of $0.45 per share on its common shares, payable to shareholders of record November 15, to be paid December 1. form of a 50% stock dividend when the market value of the common stock was $19 per share common shares, payable to shareholders of record November 15, to be paid December 1Explanation / Answer
Solution:
1) Journal Entries
Date
General Journal
Debit
Credit
Nov.1, 2016
Retained Earnings
$60,600,000
Cash Dividend Payable (101 million shares*$0.60)
$60,600,000
(Cash dividend declared)
Nov.15, 2016
No Entry on record date
Dec.1, 2016
Cash Dividend Payable
$60,600,000
Cash
$60,600,000
(Dividend paid recorded)
March.1, 2017
Investment Account (1.4 - 1.2)
$200,000
Gain on Appreciation of Investment
$200,000
March.1, 2017
Retained Earnings
$1,400,000
Property Dividend Payable
$1,400,000
March.13, 2017
No entry on record date
April.5, 2017
Property Dividend Payable
$1,400,000
Investment Account
$1,400,000
July.12, 2017
Retained Earnings
$133,320,000
Common Stock
$6,000,000
Paid in Capital - excess of par
$126,240,000
Cash (Fractional shares 60,000 @ $18)
$1,080,000
(Shares of Stock Dividend = 101,000,000Shares x 6% = 6000,000 Share without fractional)
(Fractional Shares = 60,000 Shares @ $18 MKT Value = $1,080,000 Paid in Cash)
Nov.1, 2017
Retained Earnings
$64,200,000
Cash Dividend Payable
$64,200,000
(Number of Shares = 6 + 101 = 107 Million
(Cash Dividend = 107 Million x $0.60)
Nov.15, 2017
No Entry on record date
Dec.1, 2017
Cash Dividend Payable
$64,200,000
Cash
$64,200,000
(Dividend paid recorded)
Jan.15, 2018
Common Stock
$0
Common Stock
$0
Only memorandum entry to increase the number of shares on stock split
(No of share of stock split = 107 million x 50% = 53.5 million i.e)
(Total Number of Shares after stock split = 107 + 53.5 = 160.5 million
(NO effect on total shareholders’ equity section of this transaction. Only number of shares are increase and no effect on Common Stock Value)
Nov.1, 2018
Retained Earnings
$72,225,000
Cash Dividend Payable (160.5 million shares x $0.45)
$72,225,000
Nov.15, 2018
No Entry on record date
Dec.1, 2018
Cash Dividend Payable
$72,225,000
Cash
$72,225,000
2)
Statement of Shareholders Equity
For the years ended Dec 31, 2016, 2017 and 2018
Common Stock
Additional Paid in Capital
Retained Earnings
Total Shareholder's Equity
Jan.1, 2016
$101,000.00
$600,000.00
$800,000.00
$1,501,000.00
Net Income
$335,000.00
$335,000.00
Cash dividends
-$60,600.00
-$60,600.00
Dec.31, 2016
$101,000.00
$600,000.00
$1,074,400.00
$1,775,400.00
Property dividend
-$1,400.00
-$1,400.00
Common stock dividend
$6,000.00
$126,240.00
-$133,320.00
-$1,080.00
Net Income
$400,000.00
$400,000.00
Cash dividends
-$64,200.00
-$64,200.00
Dec.31, 2017
$107,000.00
$726,240.00
$1,275,480.00
$2,108,720.00
3 for 2 split effected in the form of stock dividend
$53,500.00
$53,500.00
Net INcome
$460,000.00
$460,000.00
Cash dividends
-$72,225.00
-$72,225.00
Dec.31, 2018
$160,500.00
$726,240.00
$1,663,255.00
$2,549,995.00
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Date
General Journal
Debit
Credit
Nov.1, 2016
Retained Earnings
$60,600,000
Cash Dividend Payable (101 million shares*$0.60)
$60,600,000
(Cash dividend declared)
Nov.15, 2016
No Entry on record date
Dec.1, 2016
Cash Dividend Payable
$60,600,000
Cash
$60,600,000
(Dividend paid recorded)
March.1, 2017
Investment Account (1.4 - 1.2)
$200,000
Gain on Appreciation of Investment
$200,000
March.1, 2017
Retained Earnings
$1,400,000
Property Dividend Payable
$1,400,000
March.13, 2017
No entry on record date
April.5, 2017
Property Dividend Payable
$1,400,000
Investment Account
$1,400,000
July.12, 2017
Retained Earnings
$133,320,000
Common Stock
$6,000,000
Paid in Capital - excess of par
$126,240,000
Cash (Fractional shares 60,000 @ $18)
$1,080,000
(Shares of Stock Dividend = 101,000,000Shares x 6% = 6000,000 Share without fractional)
(Fractional Shares = 60,000 Shares @ $18 MKT Value = $1,080,000 Paid in Cash)
Nov.1, 2017
Retained Earnings
$64,200,000
Cash Dividend Payable
$64,200,000
(Number of Shares = 6 + 101 = 107 Million
(Cash Dividend = 107 Million x $0.60)
Nov.15, 2017
No Entry on record date
Dec.1, 2017
Cash Dividend Payable
$64,200,000
Cash
$64,200,000
(Dividend paid recorded)
Jan.15, 2018
Common Stock
$0
Common Stock
$0
Only memorandum entry to increase the number of shares on stock split
(No of share of stock split = 107 million x 50% = 53.5 million i.e)
(Total Number of Shares after stock split = 107 + 53.5 = 160.5 million
(NO effect on total shareholders’ equity section of this transaction. Only number of shares are increase and no effect on Common Stock Value)
Nov.1, 2018
Retained Earnings
$72,225,000
Cash Dividend Payable (160.5 million shares x $0.45)
$72,225,000
Nov.15, 2018
No Entry on record date
Dec.1, 2018
Cash Dividend Payable
$72,225,000
Cash
$72,225,000
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