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, 101 million shares at $1 par	$	101,000
Paid-in capital—excess of par		600,000
Retained earnings		800,000

1. November 1, 2021, the board of directors declared a cash dividend of $0.60 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 $1.4 million, but were purchased two years previously for $1.2 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 $18 per share). Cash was paid in lieu of fractional shares representing 60,000 equivalent whole shares.
4. On November 1, 2022, the board of directors declared a cash dividend of $0.60 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 $19 per share.
6. On November 1, 2023, the board of directors declared a cash dividend of $0.45 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 $335 million, $400 million, and $460 million for 2021, 2022, and 2023, respectively.

Answer 1

Requirement 1

Journal entry

Date	Account	Debit	Credit	working
Nov 1 2021	Retained Earnings	60600000
	Dividend Payable		60600000
	(0.60*101000000)
Dec 1 2021	Dividend Payable	60600000
	Cash		60600000
Mar 1 2022	Investment in Warner Bonds	200000
	Gain on Appreciation of Investments		200000
	(1.4m-1.2m)
Mar 1 2022	Retained Earning	1400000
	Property Dividend Payable		1400000
Apr 5 2022	Property Dividend Payable	1400000
	Investment in Warner Bonds		1400000
Jul 12 2022- Working	No of Shares issued	(101000000*6%)	6060000
Jul 12 2022	Retained Earning	109080000		(101000000*6%)*18
	Common Stock		6000000	6000000*1
	Paid in Capital, excess of par		102000000	6000000*(18-1)
	Cash		1080000	60000*17
Nov 1 2022	Retained Earnings	64200000		(101m+6m)*0.60
	Dividend Payable		64200000
Dec 1 2022	Dividend Payable	64200000
	Cash		64200000
Jan 15 2023	Retained Earning	53500000		(107m*50%*1)
	Common Stock		53500000
	(Since stock divi is more than 25%, will be recorded at par)
Nov 1 2023	Retained Earnings	72225000		(101m+6m+53.5m)*0.45
	Dividend Payable		72225000
Dec 1 2023	Dividend Payable	72225000
	Cash		72225000

Requirement 2

000 (in thousand)	Common Stock	Additional PIC	Retained Earning	Total
01-Jan-21	101000	600000	800000	1501000
Net Income			335000	335000
Cash Dividends			-60600	-60600
Dec 31 2021	101000	600000	1074400	1775400
Property Dividend			-1400	-1400
Common Stock Dividend	6000	102000	-109080	-1080
Net Income			400000	400000
Cash Dividends			-64200	-64200
Dec 31 2022	6000	102000	226720	334720
3 for 2 split-dividend	58500		-58500	0
Net Income			460000	460000
Cash Dividends			-72225	-72225
Dec 31 2023	58500	0	329275	387775