Question

On January 1, 2017, Indigo Corporation had these stockholders’ equity accounts.

Common Stock ($ 10 par value, 81,500 shares issued and outstanding)		$ 815,000
Paid-in Capital in Excess of Par Value		503,000
Retained Earnings		635,000

During the year, the following transactions occurred.

Jan.	15		Declared a $ 0.40 cash dividend per share to stockholders of record on January 31, payable February 15.
Feb.	15		Paid the dividend declared in January.
Apr.	15		Declared a 10% stock dividend to stockholders of record on April 30, distributable May 15. On April 15, the market price of the stock was $ 15 per share.
May	15		Issued the shares for the stock dividend.
Dec.	1		Declared a $ 0.70 per share cash dividend to stockholders of record on December 15, payable January 10, 2018.
Dec.	31		Determined that net income for the year was $ 358,000.

Journalize the transactions. (Include entries to close net income and dividends to Retained Earnings.)

Date	Account Titles and Explanation	Debit	Credit
	(To close net income)
	(To close stock dividends)

Answer 1

Ans- Journal Entries in the books of Indigo Corporation:-

Date	Account Title and Explanation	Debit ($)	Credit ($)
Jan.15,2017	Cash Dividends A/c Dr.	32,600
	To, Dividend Payable A/c		32,600
	(To record declaration of dividend $0.40 payable on 81,500 shares outstanding)
Feb.15,2017	Dividend Payable A/c Dr.	32,600
	To Cash or Bank A/c		32,600
	(To record dividend paid out)
Apr.15,2017	Stock Dividends A/c Dr.	122,250
	To Common Stock Dividend Distributable A/c		81,500
	To Paid in Capital in excess of par A/c		40,750
	(To record stock dividend declared for 10% OF 81,500 shares @ $ 10 face value and $ 5 market premium)
May 15,2017	Common Stock Dividend Distributable A/c Dr.	81,500
	To Common Stock A/c		81,500
	(To record shares distributed as stock dividend recored)
Dec.1, 2017	Cash Dividend A/c Dr.	62,755
	To Dividend Payable A/c		62,755
	(To record declaration of dividend $0.70 payable on 89,650) (81,500+8,150)
Dec.31, 2017	Income Summary A/c Dr.	358,000
	To Retained Earnings a/c		358,000
	(To record net income determined and transferred)
Dec.31,2017	Retained Earnings A/c Dr.	122,250
	To Stock Dividend A/c		122,250
	(To record account balance transferred and closed)
Dec.31,2017	Retained Earnings A/c Dr.	95,355
	To Cash Dividend A/c		95,355
	(To record balance of $32,600and $62,755 transferred)

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