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The stockholders' equity section of Benton Corporation's balance sheet as of December 31, 2018 is as...

The stockholders' equity section of Benton Corporation's balance sheet as of December 31, 2018 is as follows:

Stockholders' Equity

Common stock, $5 par value; authorized, 2,000,000 shares;

issued, 400,000 shares $2,000,000

Paid-in capital in excess of par 850,000

Retained earnings 3,000,000

$5,850,000

The following events occurred from January to August during 2019:

1. Jan. 5 10,000 shares of authorized and unissued common stock were sold for $8 per share.

2. Jan. 16 Purchase back 1,000 treasury shares at $10 per share.

3. Feb. 10 Reissue all the treasury shares for $14 per share.

4. March 1 A 30% stock dividend was declared and issued. Market value per share is currently $15.

5. April 1 A two-for-one split was carried out. The par value of the stock was to be reduced to $2.50 per share. Market value on March 31 was $18 per share.

6. July 1 A 15% stock dividend was declared and issued. Market value is currently $10 per share.

7. Aug. 15 A cash dividend of 20 cents per share was declared, payable September 1 to stockholders of record on August 21.

Requirements:

a) Provide journal entries for each of the above transactions.

b) What is the balance of common stock at the end of August for 2019?

c) What is the balance of retained earnings at the end of August for 2019?

d) What is the number of shares outstanding at the end of August for 2019?

Solutions

Expert Solution

a) Journal entries:
Date Account titles and explanation Debit Credit
Jan 5. Cash (10000*8) 80000
Common stock (10000*5) 50000
Paid-in capital in excess of par (Plug) 30000
(Issue of common stock)
Jan 16. Treasury stock (1000*10) 10000
Cash 10000
(Purchase of treasury stock)
Feb 10. Cash (1000*14) 14000
Treasury stock (1000*10) 10000
Paid-in capital in excess of par (Plug) 24000
(Reissue of treasury stock)
Mar 1. Retained earnings (400000+10000)*30%*5 615000
Common stock (400000+10000)*30%*5 615000
(Stock dividend issued-Large stock dividend at par)
Apr 1. No entry required
July 1. Retained earnings (Note:1) 1599000
Common stock (159900*2.5) 399750
Paid-in capital in excess of par (Plug) 1199250
(Stock dividend issued-small stock dividend at market value)
Aug 15. Retained earnings (Note:2) 245180
Dividend payable 245180
(Dividend declared)
Sep 1. Dividend payable 245180
Cash 245180
(Dividend paId)
Note:1
Stock dividend is declared on common stock outstanding
Common stock outstanding:
Shares
As on Mar 1. 410000
Add;Stock dividend (410000*30%) 123000
Total 533000
After stock split of 2:1,Number
of shares will double
Hence,As on July 1 1066000
Stock dividend in shares=1066000*15%= 159900
Stock dividend in $=159900*10=$ 1599000
Note:2
Cash dividend is declared on common stock outstanding
Common stock outstanding after stock dividend=1066000+159900=1225900
Cash dividend=1225900*0.20=$ 245180
b) Balance of common stock at the end of August for 2019=Common stock outstanding after stock dividend*Par value=1225900*2.5=$ 3064750
c) Balance of retained earnings at the end of August for 2019:
Retained earnings
$ $
Beginning balance 3000000
Less:
Mar 1. 615000
July 1. 1599000
Aug 15. 245180 2459180
Ending balance 540820
d) Number of shares outstanding at the end of August for 2019=1225900

ekkarill92 answered 1 year ago
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