Question

Part A In late 2015, the Nicklaus Corporation was formed. The corporate charter authorizes the issuance of 6,000,000 shares of common stock carrying a $1 par value, and 2,000,000 shares of $5 par value, noncumulative, nonparticipating preferred stock. On January 2, 2016, 4,000,000 shares of the common stock are issued in exchange for cash at an average price of $15 per share. Also on January 2, all 2,000,000 shares of preferred stock are issued at $20 per share.

Part B During 2016, the Nicklaus Corporation participated in three treasury stock transactions: a.On June 30, 2016, the corporation reacquires 300,000 shares for the treasury at a price of $17 per share. b.On July 31, 2016, 75,000 treasury shares are reissued at $20 per share. c.On September 30, 2016, 75,000 treasury shares are reissued at $15 per share.

Part C On October 1, 2016, Nicklaus Corporation receives permission to replace its $1 par value common stock (6,000,000 shares authorized, 4,000,000 shares issued, and 3,850,000 shares outstanding) with a new common stock issue having a $.50 par value. Since the new par value is one-half the amount of the old, this represents a 2-for-1 stock split. That is, the shareholders will receive two shares of the $.50 par stock in exchange for each share of the $1 par stock they own. The $1 par stock will be collected and destroyed by the issuing corporation.    On November 1, 2016, the Nicklaus Corporation declares a $0.25 per share cash dividend on common stock and a $0.40 per share cash dividend on preferred stock. Payment is scheduled for December 1, 2016, to shareholders of record on November 15, 2016.    On December 2, 2016, the Nicklaus Corporation declares a 2% stock dividend payable on December 28, 2016, to shareholders of record on December 14. At the date of declaration, the common stock was selling in the open market at $15 per share. The dividend will result in 154,000 (0.02 × 7,700,000) additional shares being issued to shareholders.

Required: 1. Prepare journal entries to record the declaration and payment of these stock and cash dividends. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

1 Record the entry for a 2-for-1 stock split.

2 Record declaration of cash dividend for common shares and preferred shares.

3 Record the entry on date of record.

4 Record payment of cash dividend for common shares and preferred shares.

2.

Prepare the December 31, 2016, shareholders' equity section of the balance sheet for the Nicklaus Corporation. (Assume net income for the fourth quarter was $3,000,000.) NICKLAUS CORPORATION Balance Sheet - Shareholders' Equity Section December 31, 2016 Shareholders' equity Preferred stock Common stock Paid-in capital—excess of par Paid-in capital—share repurchase Retained earnings Less: Treasury stock (2,550,000) Total shareholders' equity

Answer 1

Part – A

Solution :

   NO         Date                                                         Journal                                        Debit                Credit

1.             JAN 02                     Cash                                                                   48,000,000

                                                     Common Stock                                                               4,000,0000

                                                      Paid - in -excess of par, common                             44,000,000

2.              JAN 02                      Cash                                                                   50,000,000

                                                    Preferred stock                                                              10,000,000

                                                    Paid-in- excess of par, preferred                                 40,000,000        

NICKLAUS CORPORATION
Balance Sheet - Shareholders' Equity Section
December 31, 2016
Shareholders' equity
Preferred stock	1,00,00,000
Common stock	40,00,000
Paid-in capital—excess of par	8,40,00,000
Paid-in capital—share repurchase
Retained earnings	16,50,000
Less: Treasury stock	-25,50,000
Total shareholders' equity	6,83,50,000