Question

In late 2020, the Nicklaus Corporation was formed. The corporate charter authorizes the issuance of 5,000,000 shares of common stock carrying a $1 par value, and 1,000,000 shares of $5 par value, noncumulative, nonparticipating preferred stock. On January 2, 2021, 3,000,000 shares of the common stock are issued in exchange for cash at an average price of $10 per share. Also on January 2, all 1,000,000 shares of preferred stock are issued at $20 per share.

During 2021, the Nicklaus Corporation participated in three treasury stock transactions:

1. On June 30, 2021, the corporation reacquires 200,000 shares for the treasury at a price of $12 per share.
2. On July 31, 2021, 50,000 treasury shares are reissued at $15 per share.
3. On September 30, 2021, 50,000 treasury shares are reissued at $10 per share.

On November 1, 2021, the Nicklaus Corporation declares a $0.05 per share cash dividend on common stock and a $0.25 per share cash dividend on preferred stock. Payment is scheduled for December 1, 2021, to shareholders of record on November 15, 2021. (Please note that treasury stock are not eligible for dividends)

On December 2, 2021, the Nicklaus Corporation declares a 1% stock dividend payable on December 28, 2021, to shareholders of record on December 14. At the date of declaration, the common stock was selling in the open market at $20 per share. The dividend will result in 29,000 (0.01 × 2,900,000) additional shares being issued to shareholders.

QUESTIONS:

1. Prepare journal entries to record these transactions.

2. Prepare the December 31, 2021, shareholders' equity section of the balance sheet for the Nicklaus Corporation. (Assume net income for 2021 was $6,500,000.)

NICKLAUS CORPORATION
Balance Sheet - Shareholders' Equity Section
December 31, 2021
Shareholders' equity
Preferred stock
Common stock
Paid-in capital—excess of par
Paid-in capital—share repurchase
Retained earnings
Less: Treasury stock
Total shareholders' equity

Answer 1

ANSWER

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