Question

On January 1, 2021, Kraft Company had 62,000 common shares, recorded at $496,000. The company follows IFRS. Assume the balance in Retained Earnings at the beginning of the year is $400,000 and profit for the year was $185,000. During the year, the following transactions occurred:

Apr. 1 Issued 10,000 common shares at $10 per share.
June 15 Declared a 7% stock dividend to shareholders of record on September 5, distributable on September 20. The shares were trading for $13.50 a share at this time.
Sep. 21 Announced a 2-for-1 stock split. Shares were trading at $11.25 per share at the time.
Nov. 1 Issued 2,000 common shares at $3.10 per share.
Dec. 20 Repurchased 10,000 common shares for $5 per share. This was the first time Hum had repurchased its own shares.
Dec. 27 Paid cash dividends of $39,000.

Prepare the journal entries for the above transactions.

Answer 1

Journal Entries
Date	Account Titles and Explanation	Debit	Credit
Apr. 1	Cash (10,000 * $10)	$100,000
	Common Stock ($496,000/62,000 shares = $8 * 10,000)		$80,000
	Paid-in Capital in Excess of Par Value - Common Stock ($10 - $8 = $2 * 10,000)		$20,000
	(To record the issue of 10,000 of common shares)
Jun. 15	Stock Dividends	$68,040
	Common Stock Dividends Distributable (62,000 + 10,000 = 72,000 * 7/100 = 5,040 shares* $13.50)		$68,040
	(To record the declaration of 7% stock dividend)
Sep. 20	Common Stock Dividends Distributable	$68,040
	Common Stock (5,040 * $8)		$40,320
	Paid-in Capital in Excess of Par Value - Common Stock ($13.50 - $8 = $5.50 * 5,040)		$27,720
	(To record the payment of stock dividends)
Sep. 21	Common Stock (62,000 + 10,000 + 5,040 = 77,040 * $8)	$616,320
	Common Stock [(77,040 * 2 = 154,080) * ($8/2)]		$616,320
	(To record the stock split for 2 for 1 share held)
Nov. 1	Cash (2,000 * $3.10)	$7,000
	Discount on Issue of Common Stock ($4 - $3.50 = $0.50 * 2,000)	$1,000
	Common Stock (2,000 * $4)		$8,000
	(To record the issue of 2,000 shares for cash)
Dec. 20	Treasury Stock (10,000 * $5)	$50,000
	Cash		$50,000
	(To record purchase of own stock)
Dec. 27	Dividends	$39,000
	Cash		$39,000
	(To record the payment of cash dividends)