Question

The M Bezzlement Company had the following account balances: Common Stock (800,000 shares authorized; 500,000 shares issued), $4 par, $2,000,000; Paid-in capital in excess of par-common stock, $1,000,000; and Retained Earnings, $33,500,000. The board of directors declared a 2% stock dividend when the market price of the stock was $13 a share.

a) Journalize the entries to record (1) the declaration of the dividend, capitalizing an amount equal to market value, and (2) the issuance of the stock certificates.

b) Determine the following amounts before the stock dividend was declared: (1) total paid-in capital, (2) total retained earnings, and (3) total stockholders’ equity.

c) Determine the following amounts after the stock dividend was declared : (1) the total paid-in capital, (2) total retained earnings, and (3) total stockholders’ equity.

Problem 4:

Pace’s Pathetic Pasta distributes pasta products that are packaged with alka-seltzer. On July 9 of the current year. Pace reacquired 40,000 shares of its common stock at $44 per share (treasury stock). On September 22, Pace sold 30,000 of the reacquired shares at $50 per share. The remaining 10,000 shares were sold at $43 per share on November 23.

A) Journalize the transactions of July 9, September 22, and November 23.

Answer 1

Answer:

A.Journal Entry for Stock Dividend:

Date	Particulars	Debit	Credit
XXXX	Stock Dividend A/c	$ 1,30,000
	To Stock Dividend Distributable A/c		$    40,000
	To Paid-Up Capital In Excess of Par A/c		$    90,000
	(To Record Stock Dividend)
	Workings
	For - Stock Dividend
	($500,000 * 2% * $13)	$ 1,30,000
	For - Stock Dividend Distributable
	($500,000 * 2% * $04)	$    40,000

B.Before Stock Dividend Following Amounts of Equity:

Particulars	Remarks	Amount
Total Paid-Up Capital	($200,000 + $100,000)	$     30,00,000
Retained Earnings		$ 3,35,00,000
Total Equity		$ 3,65,00,000

C.Share holder's Equity (After Stock Dividend):

Particulars	Remarks	Amount
Total Paid-Up Capital	($30,00,000 + $1,30,000)	$     31,30,000
Retained Earnings	($3,35,00,000 - $1,30,000)	$ 3,33,70,000
Total Equity		$ 3,65,00,000

For Problem - 4:

Journal Entries:

Date	Particulars	Debit	Credit
Jul-09	Treasury Stock A/c	$ 17,60,000
	To Cash A/c		$ 17,60,000
	(To Record Purchases)
	($40,000 * 44)
Sep-22	Cash A/c ($30,000 * 50)	$ 15,00,000
	To Treasury Stock A/c ($30,000 *44)		$ 13,20,000
	To Paid in Capital Excess of Par - Treasury Stock A/c		$   1,80,000
	(To Record of Cash Reciept)
Nov-23	Cash A/c ($10,000 * 43)	$   4,30,000
	Paid in Capital Excess of Par - Treasury Stock A/c	$       10,000
	To Treasury Stock A/c ($10,000 *44)		$   4,40,000
	(To Record of Cash Reciept)

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