Question

On January 1, 2017, Monty Corp. had these stockholders’ equity accounts. Common Stock ($10 par value, 75,000 shares issued and outstanding) $750,000 Paid-in Capital in Excess of Par Value 523,000 Retained Earnings 620,000 During the year, the following transactions occurred. Jan. 15 Declared a $0.60 cash dividend per share to stockholders of record on January 31, payable February 15. Feb. 15 Paid the dividend declared in January. Apr. 15 Declared a 10% stock dividend to stockholders of record on April 30, distributable May 15. On April 15, the market price of the stock was $14 per share. May 15 Issued the shares for the stock dividend. Dec. 1 Declared a $0.50 per share cash dividend to stockholders of record on December 15, payable January 10, 2018. Dec. 31 Determined that net income for the year was $355,000.

(a) Journalize the transactions. (Include entries to close net income and dividends to Retained Earnings.) (Record entries in the order displayed in the problem statement. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Answer 1

a)

Date	Account title and Explanation	Debit	Credit
Jan 15	Retained earnings	$45,000
	Dividends payable [75,000 x $0.60]		$45,000
	[To record declaration of dividends]
Feb 15	Dividends payable	$45,000
	Cash		$45,000
	[To record payment of cash dividends]
June 15	Retained earnings [75,000 x 10% x $14 market rate]	$105,000
	Capital stock dividend distributable [75,000 x 10% x $10 par		$75,000
	Additional paid-in capital: Capital stock		$30,000
	[To record declaration of stock dividends]
May 15	Capital stock dividend distributable	$75,000
	Capital stock		$75,000
	[To record distribution of stock dividends]
Dec 1	Retained earnings	$41,250
	Dividends payable [(75,000x110%) x $0.50]		$41,250
	[To record declaration of dividends]
Dec 31	Income summary	$355,000
	Retained earnings		$355,000
	[To record net income]