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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