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please do on word document QUESTIOn 2 Hamilton Travel Corporation's (HTC) shareholders' equity section at December...

please do on word document

QUESTIOn 2

Hamilton Travel Corporation's (HTC) shareholders' equity section at December 31, 2020 appears below:

      Shareholders' equity

               Common shares, 1,000,000 shares authorized,

                        80,000 shares issued                                                                      $720,000

               Retained earnings                                                                                      180,000

      Total shareholders' equity                                                                                 $900,000

On June 30, 2021, the board of directors of HTC declared a 10% stock dividend, payable on July 31, 2021, to shareholders of record on July 15, 2021. The fair market value of HTC's shares on June 30, 2021, was $12 per share.

On December 1, 2021, the board of directors declared a 2-for-1 stock split effective December 15, 2021. HTC's shares were selling for $16 on December 1, 2021, before the share split was declared. Profit for 2021 was $225,000 and there were no cash dividends declared.

Instructions

(a)    Prepare the journal entries on the appropriate dates to record the stock dividend and the stock split. Indicate the date of the entry and if no entry is required, write “no entry”.

(b)    Fill in the amount that would appear in the shareholders' equity section for HTC at December 31, 2021, for the following items:

         1.   Common shares                                                $____________

         2.   Retained earnings                                             $____________

         3.   Total shareholders' equity                                 $____________

         4.   Number of common shares issued                   _____________


Solutions

Expert Solution

Solution:

Requirement:A

Date Accounts and Explanation Debit Credit
June. 30 Retained Earnings [80000*10%*12] $       96,000
Common Stock Dividend Distributable [80000*10%*9] $        72,000
Paid-In-Capital Excess of Par [80000*10%*3] $        24,000
( To record declaration of stock dividend)
July. 15 Common Stock Dividend Distributable [80000*10%*9] $       72,000
Common Stock $        72,000
( To record distribution of common stock)
Dec. 1 No Entry $                -  
$                 -  

Notes:

1) No entry is required for stock split.

Requirement:B

1) Common shares = $ 792,000 [ $ 720,000 + $ 72,000]

2) Retained earnings = $ 84,000 [ $ 180,000 - $ 96,000 ]

3) Total shareholders' equity = $ 900,000 [ $ 792,000 + $ 84,000 + $ 24,000 ]

4) Number of common shares issued = 176,000 Shares [ ( 80,000 + 8,000)*2 ]

ekkarill92 answered 1 year ago
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