QS 13-2

Prepare the journal entry to record each separate transaction. (a) On March 1, DVD Co. issues 44,500 shares of $4 par value common stock for $255,000 cash. (b) On April 1, GT Co. issues no-par value common stock for $50,000 cash. (c) On April 6, MTV issues 2,000 shares of $20 par value common stock for $35,000 of inventory, $135,000 of machinery, and acceptance of a $84,000 note payable.

 

QS 13-4

Prepare journal entries to record the following transactions for Skylar Corporation: May 15 declared a $48,000 cash dividend payable to common stockholders. July 31 paid the dividend declared on May 15.

 

QS 13-5

The stockholders’ equity section of Catalina Company’s balance sheet as of April 1 follows. On April 2, Catalina declares and distributes a 10% stock dividend. The stock’s per share market value on April 2 is $25. Prepare the stockholders’ equity section immediately after the stock dividend.

 

Common stock—$5 par value, 375,000 shares

Authorized, 150,000 shares issued and outstanding . . . . . . . . . .  $   750,000

Contributed capital in excess of par value, common stock . . . . . . .      352,500

Total contributed capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      1,102,500

Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         633,000

Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   $1,735,500

 

CheckPoint: Recording and Calculating Stocks

Complete Exercises 13-3 and 13-7 on pp. 529 and 530.

 

Exercise 13-3

Prepare journal entries to record the following four separate issuances of stock:

 

1. Two thousand shares of no-par common stock are issued to the corporation’s promoters in exchange for their efforts, estimated to be worth $30,000. The stock has no stated value.
2. Two thousand shares of no-par common stock are issued to the corporation’s promoters in exchange for their efforts, estimated to be worth $30,000. The stock has a $1 per share stated value.
3. Four thousand shares of $10 par value common stock are issued for $70,000 cash.
4. One thousand Shares of $100 par value preferred stock are issued for $120,000 cash.

 

Exercise13-7

On June 30, 2005, Scizzory Corporation’s common stock is priced at $31 per share before any stock dividend or split, and the stockholders’ equity section of its balance sheet appears as follows:

 

Common stock—$10 par value, 60,000 shares

Authorized, 25,000 shares issued and outstanding . . . . . . . . . . . .  $ 250,000

Contributed capital in excess of par value, common stock . . . . . . .      100,000

Total contributed capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         350,000

Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         330,000

Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     $ 680,000

 

1. Assume that the company declares and immediately distributes a 100% stock dividend. This event is recorded by capitalizing retained earnings equal to the stock’s par value. Answer these questions about stockholders’ equity as it exists after issuing the new shares:

 

1. What is the retained earnings balance?
2. What is the amount of total stockholders’ equity?
3. How many shares are outstanding?

 

2. Assume that the company implements a 2-for-1 stock split instead of the stock dividend in part1.

 

Answer these questions about stockholders’ equity as it exists after issuing the new shares:

 

1. What is the retained earnings balance?
2. What is the amount of total stockholders’ equity?
3. How many shares are outstanding?

 

3. Explain the difference, if any, to a stockholder from receiving new shares distributed under a large stock dividend versus a stock split.

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