Question

In: Accounting

On December 31, 2020, Crane Corporation had the following shareholders’ equity accounts: CRANE CORPORATION Balance Sheet...

On December 31, 2020, Crane Corporation had the following shareholders’ equity accounts:

CRANE CORPORATION
Balance Sheet (partial)
December 31, 2020
Shareholders’ equity
     Common shares (unlimited number of shares authorized, 92,000 issued) $1,033,000
     Retained earnings 520,000
Total shareholders’ equity
$1,553,000

During the year, the following transactions occurred:

Jan. 15 Declared a $1 per share cash dividend to shareholders of record on January 31, payable February 15.
July 1 Announced a 2-for-1 stock split. The market price per share on the date of the announcement was $18.
Dec. 15 Declared a 10% stock dividend to shareholders of record on December 30, distributable on January 15. On December 15, the market price of each share was $9; on December 30, $12; and on January 15, $11.
31 Determined that profit before income tax for the year was $456,000. The company has a 30% income tax rate.

part
(a)
Journalize the transactions and closing entries for 2021

Solutions

Expert Solution

Journal entries:

Date Account title and explanation Debit Credit
Jan.15 Dividends                         [92,000 shares x $1] $92,000
Dividends payable-common $92,000
[To record declaration of cash dividends]
Jan.31 No Entry on dividends record date
Feb.15 Dividends payable-common $92,000
Cash $92,000
[To record payment of cash dividends]
July 1 No Entry for stock-split
Dec.15 Retained earnings                   [184,000 x 10%] x $9 $165,600
Common stock dividend distributable $165,600
[To record declaration of stock dividends]
Dec.30 No Entry on dividends record date
Dec.31 Retained earnings $92,000
Dividends $92,000
[To record closing entry for dividends]
Dec.31 Income summary      [$456,000 x 0.70 after tax rate] $319,200
Retained earnings $319,200
[To record closing entry for net income]

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