The balance sheet of Consolidated Paper, Inc., included the following shareholde

Question

The balance sheet of Consolidated Paper, Inc., included the following shareholders' equity accounts at December 31, 2015 Paid-in capital Preferred stock, 6.5%, 89,000 shares at $1 par Common stock, 383,900 shares at $1 par Paid-in capital-excess of par, preferred Paid-in capital-excess of par, common $89,000 383,900 1,515,000 2,565,000 8,945,000 (46,800) Retained earnings Treasury stock, at cost; 3,900 common shares Total shareholders' equity $13,451,100 During 2016, several events and transactions affected the retained earnings of Consolidated Paper Required: 1. Prepare the appropriate entries for these events. (If no entry is required for a transactionlevent, select "No journal entry required" in the first account field.) a. On March 3 the board of directors declared a property dividend of 250,000 shares of Leasco International common stock that Consolidated Paper had purchased in January as an investment (book value $981,000). The investment shares had a fair value of $4 per share and were distributed March 31 to shareholders of record March 15 b. On May 3 a 5-for-4 stock split was declared and distributed. The stock split was effected in the form of a C. On July 5 a 3% common stock dividend was declared and distributed. The market value of the common d. On December 1 the board of directors declared the 6.5% cash dividend on the 89,000 preferred shares, e. On December 1 the board of directors declared a cash dividend of $0.40 per share on its common 25% stock dividend. The market value of the $1 par common stock was $12 per share stock was $12 per share payable on December 28 to shareholders of record December 20 shares, payable on December 28 to shareholders of record December 20.

Explanation / Answer

ans)

1) Mar 3 Investment in Leasco International stock 19000

Gain on investment 19000

(Gain on appreciation of investment ($1,000,000 – 981,000) = $19,000)

  

Mar 3 Retained earnings 1,000,000

Property dividends payable 1,000,000

( Retained earnings (250,000 shares at $4 per share) = $1,000,000)

Mar 15 No journal entry required

March 31 Property dividendspayable 1,000,000

Investment inLeasco Internationalstock 1,000,000

May 3 Paid-in capital—Excess of par,common 95000

Common stock 95000

(25% × [383900 – 3,900] shares at $1 par) = $95000

July 5   Retained earnings 171000

Common stock 14250

Paid-in capital—Excess of par,common 156750

  Retained earnings (14,250* × $12 per share) = $171000

Common stock (14,250* × $1 par) = $14,250

*3% (380,000 + 95000 shares) = 14250 additional shares

Dec 1 Retained earnings (89000 X 6.5%) 5785

Cash dividend payable 5785

Dec 20 No journal entry required

Dec 28 Cash dividends payable 5785

Cash 5785

Dec 1 Retained earnings 195700

Cash dividends payable 195700

(380,000 + 95000 + 14250) X $0.4 = 195700

Dec 20 No journal entry required

Dec 28 Cash dividends payable 195700

Cash 195700

2) Shareholder's Equity section

Paid-in capital:

Preferred stock, 6.5%, 89000 shares at $1 par 89000

Common stock ( 383,900 + 95000 + 14250) $1 par 493150

Paid-in capital—excess of par,preferred 1515000

Paid-in capital—excess of par,common 2626750

(2565000 - 95000 +156750)

Retained earnings:

Retained earnings 8362515

(8945000 - 1,000,000 - 171000 - 5785 - 195700 +790,000)

Treasury stock (46800)

Total shareholders’equity 13039615

  

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