Question

Listed below are the transactions that affected the shareholders’ equity of Branch-Rickie Corporation during the period 2021–2023. At December 31, 2020, the corporation’s accounts included:

	($ in thousands)
Common stock, 109 million shares at $1 par	$	109,000
Paid-in capital—excess of par		654,000
Retained earnings		880,000

1. November 1, 2021, the board of directors declared a cash dividend of $0.80 per share on its common shares, payable to shareholders of record November 15, to be paid December 1.
2. On March 1, 2022, the board of directors declared a property dividend consisting of corporate bonds of Warner Corporation that Branch-Rickie was holding as an investment. The bonds had a fair value of $2.4 million, but were purchased two years previously for $2.1 million. Because they were intended to be held to maturity, the bonds had not been previously written up. The property dividend was payable to shareholders of record March 13, to be distributed April 5.
3. On July 12, 2022, the corporation declared and distributed a 6% common stock dividend (when the market value of the common stock was $16 per share). Cash was paid in lieu of fractional shares representing 540,000 equivalent whole shares.
4. On November 1, 2022, the board of directors declared a cash dividend of $0.80 per share on its common shares, payable to shareholders of record November 15, to be paid December 1.
5. On January 15, 2023, the board of directors declared and distributed a 3-for-2 stock split effected in the form of a 50% stock dividend when the market value of the common stock was $17 per share.
6. On November 1, 2023, the board of directors declared a cash dividend of $0.65 per share on its common shares, payable to shareholders of record November 15, to be paid December 1.

Required:
1. Prepare the journal entries that Branch-Rickie recorded during the three-year period for these transactions.
2. Prepare comparative statements of shareholders’ equity for Branch-Rickie for the three-year period ($ in 000s). Net income was $375 million, $440 million, and $500 million for 2021, 2022, and 2023, respectively.

Answer 1

Prepare journal entries as follows:

Date	General Journal	Debit	Credit
Nov. 01, 2021	Retained Earnings [109,000,000 × $0.80]	$87,200,000
	Dividend payable		$87,200,000
Nov. 15, 2021	No entry
Dec. 01, 2021	Dividend payable	$87,200,000
	Cash		$87,200,000
Mar. 01, 2022	Investment in warner corp.	$300,000
	Gain on appreciation of investments		$300,000
	[$2.4 million - $2.1 milion]
Mar. 01, 2022	Retained Earnings	$2,400,000
	Property dividend payable		$2,400,000
Mar. 13, 2022	No entry
Apr. 05, 2022	Property dividend payable	$2,400,000
	Investment in warner corp.		$2,400,000
Jul. 12, 2022	Retained Earnings [6540000 × $16]	$104,640,000
	Common stock [6000000 × $1]		$6,000,000
	Paid in capital in excess of par [6000000 × $15]		$90,000,000
	Cash [540000 × $16]		$8,640,000
Nov. 01, 2022	Retained Earnings [115,000,000 × $0.80]	$92,000,000
	Dividend payable		$92,000,000
Nov. 15, 2022	No entry
Dec. 01, 2022	Dividend payable	$92,000,000
	Cash		$92,000,000
Jan. 15, 2023	Retained Earnings	$57,500,000
	Common stock [115,000,000 × 50% × $1]		$57,500,000
	(recorded at par)
Nov. 01, 2023	Retained Earnings [115,000,000 - 57,500,000 × $0.65]	$37,375,000
	Dividend payable		$37,375,000
Dec. 01, 2023	Dividend payable	$37,375,000
	Cash		$37,375,000

Working note
Jul. 01, 2012	Common stock dividend [A]	6%
	Number of shares outstanding [B]	109,000,000.00
	Stock dividend [C = A*B]	6,540,000.00
	Cash issued for fractional shares [D]	540,000.00
	Shares distributed [C-D]	6,000,000.00
Nov. 01, 2022	Number of shares outstanding before stock dividend	109,000,000.00
	Add: Common shares distributed for stock dividend	6,000,000.00
	Total shares outstanding	115,000,000.00

____________________________________________________________________________

2.

Prepare comparative statements of shareholders’ equity for Branch-Rickie for the three-year period

Statement of shareholders' Equity ($ in 000s)
	Common stock	Additional paid-in capital	Retained Earnings	Total Shareholders' Equity
Beg balance, Jan. 01, 2021	$109,000	$654,000	$880,000	$1,643,000
Net Income			$375,000	$375,000
Cash Dividend			($87,200)	($87,200)
Dec. 31, 2021	$109,000	$654,000	$1,167,800	$1,930,800
Property Dividends			($2,400)	($2,400)
Common stock dividend	$6,000	$90,000	($104,640)	($8,640)
Net Income			$440,000	$440,000
Cash dividends			($92,000)	($92,000)
Dec. 31, 2022	$115,000	$744,000	$1,408,760	$2,267,760
3 for 2 split (stock dividend)	$57,500		($57,500)
Net Income			$500,000	$500,000
Cash dividends			($37,375)	($37,375)
Dec. 31, 2023	$172,500	$744,000	$1,813,885	$2,730,385