Question

Problem 11-7A (Part Level Submission) On January 1, 2019, Larkspur, Inc. had the following stockholders' equity accounts.

Common Stock ($10 par value, 78,300 shares issued and outstanding) $783,000

Paid-in Capital in Excess of Par Value-Common Stock 199,000

Retained Earnings 593,000

During the year, the following transactions occurred.

Jan. 15 Declared a $1.10 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 5% stock dividend to stockholders of record on April 30, distributable

May 15. On April 15, the market price of the stock was $16 per share. May 15 Issued the shares for the stock dividend.

July 1 Announced a 2-for-1 stock split. The market price per share prior to the announcement was $14. (The new par value is $5.)

Dec. 1 Declared a $0.50 per share cash dividend to stockholders of record on December 15, payable January 10, 2020.

Dec. 31 Determined that net income for the year was $225,000.

a)Journalize the transactions and the closing entries for net income and dividends.

FYI

Solution

CLOSE

Problem 11-7A (Part Level Submission)

Jan. 15	Cash Dividends	(78,300 × $1.10)	$86,130
Apr. 15	Stock Dividends	(3,915 × $16)	$62,640
	Common Stock Dividends Distributable	(3,915 × $10)	$39,150
	Paid-in Capital in Excess of Par-Common Stock	(3,915 × $6)	$23,490
July 1	Memo - two-for-one stock split increases number of shares to 164,430
	= (82,215 × 2) and reduces par value to $5 per share.
Dec. 1	Cash Dividends	(164,430 × $0.50)	$82,215
Dec. 31	Retained Earnings	($39,150 + $82,215)	$168,345

Answer 1

• All working forms part of the answer
• Journal Entries are asked by you, and these are based on the amounts provided by you:

Date	Accounts title	Debit	Credit
Jan-15	Dividends	$                            86,130.00
	Cash		$               86,130.00
	(cash dividend paid)
Apr-15	Dividends	$                             62,640.00
	Dividend distributable		$               62,640.00
	(stock dividend declared)
May-15	Dividend distributable	$                             62,640.00
	Common Stock		$               39,150.00
	Paid in Capital in excess of Par - Common Stock		$               23,490.00
	(stock dividend distributed)
Jul-01	NO ENTRY
Dec-01	Dividends	$                             82,215.00
	Cash		$               82,215.00
	(cash dividend paid)
Dec-31	Retained Earnings	$                           168,345.00
	Dividends		$             168,345.00
	(dividend account closed)
Dec-31	Income Summary	$                           225,000.00
	Retained Earnings		$             225,000.00
	(Net Income closed)