Question

The balance sheet of Consolidated Paper, Inc., included the following shareholders’ equity accounts at December 31, 2015:

Paid-in capital:
Preferred stock, 8.8%, 90,000 shares at $1 par	$	90,000
Common stock, 364,000 shares at $1 par		364,000
Paid-in capital—excess of par, preferred		1,437,000
Paid-in capital—excess of par, common		2,574,000
Retained earnings		9,735,000
Treasury stock, at cost; 4,000 common shares		(44,000	)
Total shareholders' equity	$	14,156,000

During 2016, several events and transactions affected the retained earnings of Consolidated Paper.

Required:

1.	Prepare the appropriate entries for these events. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

a.	On March 3 the board of directors declared a property dividend of 240,000 shares of Leasco International common stock that Consolidated Paper had purchased in January as an investment (book value: $700,000). The investment shares had a fair value of $3 per share and were distributed March 31 to shareholders of record March 15.
b.	On May 3 a 5-for-4 stock split was declared and distributed. The stock split was effected in the form of a 25% stock dividend. The market value of the $1 par common stock was $11 per share.
c.	On July 5 a 2% common stock dividend was declared and distributed. The market value of the common stock was $11 per share.
d.	On December 1 the board of directors declared the 8.8% cash dividend on the 90,000 preferred shares, payable on December 28 to shareholders of record December 20.
e.	On December 1 the board of directors declared a cash dividend of $.50 per share on its common shares, payable on December 28 to shareholders of record December 20.

• (a) Record any necessary adjustments to the Leasco International stock account as a result of the property dividend declaration.

• 2

  (a) Record the declaration of the property dividend.

• 3

  (a) Record the entry on the date of record.

• 4

  (a) Record the distribution of the property dividend.

• 5

  (b) Record the declaration and distribution of the stock split effected in the form of a stock dividend. Note: Debit Paid-in capital – excess of par, common rather than Retained earnings

• 6

  (c) Record the declaration and distribution of the stock dividend.

• 7

  (d) Record entry for cash dividend on preferred stock on date of declaration.

• 8

  (d) Record the entry on the date of record.

• 9

  (d) Record the payment of cash dividends to preferred shareholders.

• 10

  (e) Record the declaration of cash dividends to common shareholders.

• 11

  (d) Record the entry on the date of record.

• 12

  (d) Record the payment of cash dividends to common shareholders.

Answer 1

No	Transaction	Date	General Journal	Debit	Credit
1)	A)	Mar-03	Investment in Leasco {(240,000*$3 )-($700,000)}	$ 20,000
			Gain on Revaluation of Leasco		$ 20,000
			(To record necessary adjustments to Leasco international stock )
2)	A)	Mar-03	Retained earnings (240,000 shares *$3)	$ 720,000
			Property Dividend payable		$ 720,000
			(To record declaration of the property dividend )
3)	A)	Mar-15	No Journal Entry
			(To record the entry on the date of record )
4)	A)	Mar-31	Property Dividend payable	$ 720,000
			Investment in Leasco		$ 720,000
			(To record distribution of Property dividend )
5)	B)	May-03	Retained earnings (25%*(364,000 -4,000) shares *$1)	$ 90,000
			Common stock (107,500 shares *$ 1 )		$ 90,000
			(To record declaration and distribution of stock split effected in stock dividend )
6)	C)	Jul-05	Retained Earnings {(364,000-4,000+90,000)shares*2%)}=9,000 shares*$ 11	$ 99,000
			Common stock (9,000 shares *$ 1 )		$ 9,000
			Paid in capital -Excess of Par- Common (9,000 shares*$10)		$ 90,000
			(To record declaration and distribution of stock dividend )
7)	D)	Dec-01	Retained Earnings (90,000 shares *$1 * 8.80%)	$7,920
			Preferred Dividend payable		$7,920
			(To record cash dividend Preferred stock on date of declaration )
8)	D)	Dec-20	No Journal Entry
			(To record the entry on the date of record )
9)	D)	Dec-28	Preferred Dividend payable	$7,920
			Cash		$7,920
			(To record cash dividend Paid to preferred shareholders )
10)	E)	Dec-01	Retained Earnings {(434,000-4,000+90,000+9,000)shares*$ 0.50)}	$ 229,500
			Dividend payable -Common stock		$ 229,500
			(To record Declared cash dividend to common shareholders)
11)	E)	Dec-20	No Journal Entry
			(To record the entry on the date of record )
12)	E)	Dec-28	Dividend payable -Common stock	$ 229,500
			Cash		$ 229,500
			(To record cash dividend Paid to Common shareholders )