Log out Go to App
Go to App

Learning Materials

Features

Discover

Chapter 15: Question 13BE (page 811)

Green Day Corporation has outstanding 400,000 shares of \(10 par value common stock. The corporation declares a 5% stock dividend when the fair value of the stock is \)65 per share. Prepare the journal entries for Green Day Corporation for both the date of declaration and the date of distribution.

Short Answer

Expert verified

The total dividend distributed by Green Day Corporation is $200,000.

Step by step solution

01

Meaning of Common Stock

The security that symbolizes possession in a company is known as common stock. Unusual shareholders do not accompany the board of administrators and do not participate in enterprise decision-making.

02

Preparing Journal Entries   

Date

Particular

Debit ($)

Credit ($)

Declaration Date

Retained Earnings A/c

1,300,000

Common Stock Dividend Distributable A/c

200,000

Paid-in Capital in excess of par common stock A/c

1,100,000

To record the payment of dividend

DistributionDate

Common Stock Dividend Distributable A/c

200,000

Common Stock A/c

200,000

To record the payment of dividend

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Start your free trial

Over 30 million students worldwide already upgrade their learning with Vaia!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

Kellogg Company is the world’s leading producer of ready-to-eat cereal products. In recent years, the company has taken numerous steps aimed at improving its profitability and earnings per share. Presented below are some basic facts for Kellogg.

(in millions)

2014

2013

Net sales

\(14,580

\)14,792

Net income

632

1,807

Total assets

15,153

15,474

Total liabilities

12,302

11,867

Common stock, $0.25 par value

105

105

Capital in excess of par value

678

626

Retained earnings

6,689

6,749

Treasury stock, at cost

3,470

2,999

Number of shares outstanding (in millions)

358

363

Instructions

  1. What are some of the reasons that management purchases its own stock?
  2. Explain how earnings per share might be affected by treasury stock transactions.
  3. Calculate the debt to assets ratio for 2013 and 2014, and discuss the implications of the change.

Distinguish between common and preferred stock

Faith Evans Corporation is a regional company which is an SEC registrant. The corporation’s securities are thinly traded on NASDAQ. Faith Evans Corp. has issued 10,000 units. Each unit consists of a \(500 par, 12% subordinated debenture and 10 shares of \)5 par common stock. The units were sold to outside investors for cash at \(880 per unit. Prior to this sale, the 2-week ask price of common stock was \)40 per share. Twelve percent is a reasonable market yield for the debentures, and therefore the par value of the bonds is equal to the fair value.

Instructions

  1. Prepare the journal entry to record Evans’ transaction, under the following conditions.
  2. Employing the incremental method.
  3. Employing the proportional method, assuming the recent price quote on the common stock reflects fair value.
  4. Briefly explain which method is, in your opinion, the better method.

The following is a summary of all relevant transactions of Vicario Corporation since it was organized in 2017. In 2017, 15,000 shares were authorized and 7,000 shares of common stock (\(50 par value) were issued at a price of \)57. In 2018, 1,000 shares were issued as a stock dividend when the stock was selling for \(60. Three hundred shares of common stock were bought in 2019 at a cost of \)64 per share. These 300 shares are still in the company treasury.

In 2018, 10,000 preferred shares were authorized and the company issued 5,000 of them (\(100 par value) at \)113. Some of the preferred stock was reacquired by the company and later reissued for \(4,700 more than it cost the company.

The corporation has earned a total of \)610,000 in net income after income taxes and paid out a total of $312,600 in cash dividends since incorporation.

Instructions

Prepare the stockholders’ equity section of the balance sheet in proper form for Vicario Corporation as of December 31, 2019. Account for treasury stock using the cost method.

(Cash Dividend and Liquidating Dividend) Lotoya Davis Corporation has 10 million shares of common stock issued and outstanding. On June 1, the board of directors voted an 80 cents per share cash dividend to stockholders of record as of June 14, payable June 3

Instructions

  1. Prepare the journal entry for each of the dates above, assuming the dividend represents a distribution of earnings.
  2. How would the entry differ if the dividend were a liquidating dividend?
See all solutions

Recommended explanations on Business Studies Textbooks

Intermediate Accounting

Read Explanation

Organizational Communication

Read Explanation

Financial Performance

Read Explanation

Introduction to Business

Read Explanation

Influences On Business

Read Explanation

Business Case Studies

Read Explanation
View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.

Sign-up for free