On January 1, 2010, Carolinas Corporation had the ...



On January 1, 2010, Carolinas Corporation had the following stockholders' equity accounts. Common Stock ($20 par value, 60,000 shares issued and outstanding) $1,200,000 Paid-in Capital in Excess of Par Value 200,000 Retained Earnings 600,000 During the year, the following transactions occurred. Feb. 1 Declared a $1 cash dividend per share to stockholders of record on February 15, payable March 1. Mar. 1 Paid the dividend declared in February. Apr. 1 Announced a 2-for-1 stock split. Prior to the split, the market price per share was $36. July 1 Declared a 10% stock dividend to stockholders of record on July 15, distributable July 31. On July 1, the market price of the stock was $13 per share. 31 Issued the shares for the stock dividend. Dec. 1 Declared a $0.50 per share dividend to stockholders of record on December 15, payable January 5, 2011. 31 Determined that net income for the year was $350,000. Hint: Prepare dividend entries and stockholders' equity section. (SO 1, 3) Instructions (a) Journalize the transactions and the closing entry for net income. (b) Enter the beginning balances, and post the entries to the stockholders' equity accounts. (Note: Open additional stockholders' equity accounts as needed.) (c) Prepare a stockholders' equity section at December 31.

(a) Feb.  1 Retained Earnings (60,000 X $1)  60,000

Dividends Payable  60,000

Mar.  1 Dividends Payable  60,000

Cash  60,000

Apr.  1 Memo—two-for-one stock split

  increases number of shares to

  120,000 = (60,000 X 2) and reduces

  par value to $10 per share.

July  1 Retained Earnings (12,000 X $13) 156,000

Common Stock Dividends

  Distributable (12,000 X $10) 120,000

Paid-in Capital in Excess of

  Par Value (12,000 X $3) 36,000

31 Common Stock Dividends

  Distributable 120,000

Common Stock 120,000

Dec.  1 Retained Earnings (132,000 X $.50) 66,000

Dividends Payable 66,000

31 Income Summary 350,000

Retained Earnings 350,000

(b)

Common Stock

|Date | |Explanation | |Ref. | |Debit | |Credit | |Balance |

|Jan.  1 | |Balance | |Π | | | | | |1,200,000 |

|Apr.  1 | |2 for 1 split—new | | | | | | | | |

| | |  par $10 | | | | | | | | |

|July 31 | | | | | | | |120,000 | |1,320,000 |

Common Stock Dividends Distributable

|Date | |Explanation | |Ref. | |Debit | |Credit | |Balance |

|July  1 | | | | | | | |120,000 | |120,000 |

|31 | | | | | |120,000 | | | |      0 |

Paid-in Capital in Excess of Par Value

|Date | |Explanation | |Ref. | |Debit | |Credit | |Balance |

|Jan.  1 | |Balance | |Π | | | | | |200,000 |

|July  1 | | | | | | | |36,000 | |236,000 |

Retained Earnings

|Date | |Explanation | |Ref. | |Debit | |Credit | |Balance |

|Jan.  1 | |Balance | |Π | | | | | |600,000 |

|Feb.  1 | |Cash dividend | | | | 60,000 | | | |540,000 |

|July  1 | |Stock dividend | | | |156,000 | | | |384,000 |

|Dec.  1 | |Cash dividend | | | |66,000 | | | |318,000 |

|31 | |Net income | | | | | |350,000 | |668,000 |

(c) CAROLINAS CORPORATION

Balance Sheet (Partial)

December 31, 2010

Stockholders’ equity

Paid-in capital

Capital stock

Common stock, $10 par value, 132,000

  shares issued and outstanding $1,320,000

Additional paid-in capital

In excess of par value 236,000

Total paid-in capital  1,556,000

Retained earnings 668,000

Total stockholders’ equity $2,224,000

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