Question

Listed below are the transactions that affected the shareholders’ equity of Branch-Rickie Corporation during the period 2018–2020. At December 31, 2017, the corporation’s accounts included:

	($ in 000s)
Common stock, 104 million shares at $1 par	$	104,000
Paid-in capital—excess of par		618,000
Retained earnings		830,000

1. November 1, 2018, the board of directors declared a cash dividend of $0.50 per share on its common shares, payable to shareholders of record November 15, to be paid December 1.
2. On March 1, 2019, 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 $1.8 million, but were purchased two years previously for $1.6 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, 2019, the corporation declared and distributed a 5% common stock dividend (when the market value of the common stock was $22 per share). Cash was paid in lieu of fractional shares representing 200,000 equivalent whole shares.
4. On November 1, 2019, the board of directors declared a cash dividend of $0.50 per share on its common shares, payable to shareholders of record November 15, to be paid December 1.
5. On January 15, 2020, 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 $23 per share.
6. On November 1, 2020, the board of directors declared a cash dividend of $0.35 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. Net income was $350 million, $415 million, and $475 million for 2018, 2019, and 2020, respectively.

Answer 1

1. In the books of Branch-Rickie Corporation:

Transaction	Date	Account Titles	Debit	Credit
			$ (000)	$ ( 000)
a.	November 1, 2018	Retained Earnings	52,000
		Cash Dividends Payable		52,000
a.	December 1, 2018	Cash Dividends Payable	52,000
		Cash		52,000
b.	March 1, 2019	Investments in Warner Bonds	200
		Gain on Investments		200
b.	March 1, 2019	Retained Earnings	1,800
		Property Dividends Payable		1,800
b.	April 5, 2019	Property Dividends Payable	1,800
		Investment in Warner Bonds		1,800
c.	July 12, 2019	Retained Earnings	114,400
		Common Stock		5,000
		Paid-in Capital in Excess of Par		105,000
		Cash ( 200,000 x $ 22)		4,400
d.	November 1, 2019	Retained Earnings	54,500
		Dividends Payable		54,500
d.	December 1, 2019	Dividends Payable	54,500
		Cash		54,500
e.	January 15, 2020	Retained Earnings	54,500
		Common Stock		54,500
f.	November 1, 2020	Retained Earnings	57,225
		Dividends Payable		57,225
f.	December 1, 2020	Dividends Payable	57,225
		Cash		57,225

2.

	Common Stock	Paid-in Capital, Excess of Par	Retained Earnings	Total Stockholders Equity
December 31, 2017	104,000	618,000	830,000	1,552,000
2018			(52,000)	(52,000)
Net Income			350,000	350,000
December 31, 2018				1,850,000
2019
Property Dividends			(1,800)	(1,800)
Stock Dividends	5,000	105,000	(114,400)	(4,400)
Net Income			415,000	415,000
Cash Dividends			(54,500)	(54,500)
December 31, 2019				2,204,300
2020
Stock Dividends	54,500		(54,500)	0
Cash Dividends			(57,225)	(57,225)
Net Income			475,000	475,000)
December 31,2020	163,500	723,000	1,735,575	2,622,075