Question

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

Paid-in capital:
Preferred stock, 8.0%, 93,000 shares at $1 par	$	93,000
Common stock, 434,300 shares at $1 par		434,300
Paid-in capital—excess of par, preferred		1,545,000
Paid-in capital—excess of par, common		2,595,000
Retained earnings		9,245,000
Treasury stock, at cost; 4,300 common shares		(51,600	)
Total shareholders' equity	$	13,860,700

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 265,000 shares of Leasco International common stock that Consolidated Paper had purchased in January as an investment (book value: $772,000). 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 $12 per share.
c.	On July 5 a 2% common stock dividend was declared and distributed. The market value of the common stock was $12 per share.
d.	On December 1 the board of directors declared the 8.0% cash dividend on the 93,000 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 $0.50 per share on its common shares, payable on December 28 to shareholders of record December 20.
2. Prepare the shareholders' equity section of the balance sheet for Consolidated Paper, Inc. at December 31, 2016. Net income for the year was $830,000. (Negative amounts should be indicated by a minus sign.)

Answer 1

Journal Entries
Date	Particulars	Debit	Credit
Mar-03	Investment in Leaseco International Stock	$                                        23,000.00
	Gain on Investment		$       23,000.00
Mar-03	Retained Earnings	$                                     7,95,000.00
	Property dividends Payable		$    7,95,000.00
Mar-15	No Journal Entry Required	-	-
Mar-31	Property dividends Payable	$                                     7,95,000.00
	Investment in Leaseco International Stock		$    7,95,000.00
May-03	Paid in Capital- Excess of par, Common	$                                     1,07,500.00
	Common Stock		$    1,07,500.00
Jul-05	Retained Earnings	$                                     1,29,000.00
	Common Stock		$       10,750.00
	Paid in Capital- Excess of par, Common		$    1,18,250.00
Dec-01	Retained earnings	$                                           7,440.00
	Cash Dividend Payable		$          7,440.00
Dec-20	No Journal Entry	-	-
Dec-28	Cash Dividend Payable	$                                           7,440.00
	Cash		$          7,440.00
Dec-01	Retained earnings	$                                     2,74,125.00
	Cash Dividend Payable		$    2,74,125.00
Dec-20	No Journal Entry	-	-
Dec-28	Cash Dividend Payable	$                                     2,74,125.00
	Cash		$    2,74,125.00
Working Notes
Mar-03	Gain on Investment	($7,95,000-$7,72,000)	=	$         23,000.00
	Retained Earnings	2,65,000 shares at $3 per share
May-03	Common stock		=	$     1,07,500.00
	25% 0f (4,34,300-4,300) at $1 par.
Jul-05	Retained Earnings	(10750*$12)	=	$     1,29,000.00
	Common stock	(10750* $1 per share)	=	$         10,750.00
	*2% of (4,30,000+1,07,500)		=	10750 additional Shares
Dec-01	Cash Dividend Payable	($ 93,000 par *8%)	=	$           7,440.00
Dec-01	Cash Dividend Payable	(5,48,250*$0.50)	=	$     2,74,125.00
	*4,30,000+1,07,500+10,750 = 5,48,250
	Consolidated Paper, Inc.
	[shareholders' equity section}
	December 31, 2016
	Paid In Capital:
	Preferred Stock	$                                           7,440.00
	Common Stock	$                                     5,52,550.00
	Paid in Capital- Excess of par, Preferred	$                                  15,45,000.00
	Paid in Capital- Excess of par, Common	$                                  26,05,750.00
	Retained earnings :
	Retained earnings	$                                  88,69,435.00
	Treasury stock	$                                       -43,000.00
	Total Shareholder's Equity	$                               1,35,37,175.00
	Working Notes
	Preferred Stock	(8% of $93,000 at par)	$          7,440.00
	Common Stock	5,52,550 shares at $1 par	$    5,52,550.00
	**4,34,300+1,07,500+10,750 = 5,52,550
	Treasury stock	at cost 4,300 common shares	$      -43,000.00
	Paid in Capital- Excess of par, Common		$ 26,05,750.00
	(25,95,000-1,07,500+1,18,250)
	Retained earnings
	(92,45,000-7,95,000-1,29,000-7,440-2,74,125+8,30,000)		$ 88,69,435.00