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Identifying and Analyzing Financial Statement Effects of Dividends The stockholders’ equity of Palepu Company at December...

Identifying and Analyzing Financial Statement Effects of Dividends

The stockholders’ equity of Palepu Company at December 31, 2015, appears below.

During 2016, the following transactions occurred:

Required

a. Using the financial statement effects template, illustrate the effects of these transactions.

b. Prepare the journal entries for these transactions.

c. Post the journal entries from b to the related T-accounts.

d. Prepare a retained earnings reconciliation for 2016 assuming that the company reports 2016 net income of $283,000. Hint: Do not use negative signs with answers below.

Common stock, $12 par value, 200,000 shares authorized;
80,000 shares issued and outstanding $960,000
Paid-in capital in excess of par value 485,000
Retained earnings 310,000
May 12 Declared and issued a 6% stock dividend; the common stock market value was $18 per share.
Dec. 31 Declared and paid a cash dividend of 75 cents per share.
Balance Sheet
Transaction Cash Asset + Noncash Assets = Liabilities + Contrib. Capital + Earned Capital
5/12 Declared and paid stock dividend $Answer + $Answer = $Answer + $57,600 + $Answer
Answer + Answer = Answer + Answer + Answer
12/31 Declared and issued cash dividend Answer + Answer = Answer + Answer + Answer
Income Statement

Revenues
-
Expenses
=
Net Income
$Answer - $Answer = $Answer
Answer - Answer = Answer
Answer - Answer = Answer
General Journal
Date Description Debit Credit
5/12 Answer
Answer Answer
Common Stock Answer Answer
Answer
Answer Answer
12/31 Answer
Answer Answer
Answer
Answer Answer
Cash (A)
5/12 Answer Answer
12/31 Answer Answer
Common Stock (SE)
5/12 Answer Answer
12/31 Answer Answer
Retained Earnings (SE)
5/12 Answer Answer
12/31 Answer Answer
Additional Paid-in Capital (SE)
5/12 Answer Answer
12/31 Answer Answer
PALEPU COMPANY
Statement of Retained Earnings
For the Year Ended December 31, 2016
Retained earnings, December 31, 2015 $Answer
Add:
Answer
Answer
Answer
Less:
Cash dividends declared $Answer
Answer
Answer Answer
Retained earnings, December 31, 2016 $Answer

Solutions

Expert Solution

a. Stock dividend % <20-25% considered as small stock dividend
Stock dividend=Number of shares*Stock dividend %*market value=80000*6%*18=$ 86400
Love corporation
Balance sheet Income statement Statement of
cashflow
Date Assets = Liabilities + Stockholder's equity Revenue - Expense = Net
income
Cash Common
Stock		 + PIC in
excess		 + Retained
earnings
May 12.
57600 28800 -86400
(80000*6%*12) (80000*6%*6) NA NA
Dec 31. -60000 60000
(80000*0.75)
b. Date Account titles and explanation Debit Credit
May 12. Retained earnings 86400
Common stock 57600
Additional paid-in capital 28800
(Declared and issued stock dividned)
Dec 31. Retained earnings 60000
Cash 60000
(Declared and paid cash dividend)
c. Cash
Date Particulars Debit Credit
2016
Dec 31. Retained earnings 60000
Common stock
Date Particulars Debit Credit
2016
Jan 1. Bal. 960000
May 12. Retained earnings 57600
0 1017600
Dec 31. 107600
Retained earnings
Date Particulars Debit Credit
2016
Jan 1. Bal. 310000
May 12. Common stock 57600
Additional paid-in capital 28800
Dec 31. Cash 60000
146400 310000
Dec 31. Bal. 163600
Additional paid-in capital
Date Particulars Debit Credit
2016
Jan 1. Bal. 485000
May 12. Retained earnings 28800
0 513800
Dec 31. Bal. 513800
d. Statement of retained earnings
$ $
Retained earnings, December 31, 2015 310000
Add: Net income 283000
593000
Less:
Stock dividend 86400
Cash dividend 60000 146400
Retained earnings, December 31, 2016 446600

ekkarill92 answered 3 years ago
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