Question

In: Accounting

This is the stockholders equity section of Leveon James and co. at December 31, 2018: 31-Dec-18...

This is the stockholders equity section of Leveon James and co. at December 31, 2018:
31-Dec-18 31-Dec-19
Common stock, $10 par value, 1,000,000 shares issued & outstanding 10,000,000 10,000,000
Additional paid-in-capital Common stock 3,000,000
Retained Earnings 8,750,000
$21,750,000
The following transactions occurred in 2019:
1-Feb Declared a cash dividend of $.50 per share to common shareholders of record on February 15th
payable on March 1st
1-Mar Paid the dividend declared on February 1st
1-Apr Announced a 5 for 1 common stock split, the market price was $20 per share
1-Jul Declared a 7% common stock dividend, distributable July 31st, the market price was $22 per share
31-Jul Issued the shares for the stock dividend
1-Dec Declared a commn stock cash dividend of .25 per share of record on December 15th
31-Dec Net income for the year was $1,450,000
A. Journalize the transactions.
B. Prepare the December 31, 2019 stockholders equity section above

Solutions

Expert Solution

A.

Date Account title and explanation Debit Credit
Feb 1 Cash dividends [1,000,000 x $0.50] $500,000
Dividends payable-Common $500,000
[To record declaration of cash dividends]
Mar 1 Dividends payable-Common $500,000
Cash $500,000
[To record payment of cash dividends]
Apr 1 No Entry
July 1 Stock dividends [350,000 x $22] $7,700,000
Common stock dividend payable [350,000 x $5] $1,750,000
Additional paid in capital Common stock $5,950,000
[To record declaration of stock dividends]
July 31 Common stock dividend payable $1,750,000
Common stock $1,750,000
[To record distribution of stock dividends]
Dec 1 Cash dividends [5,350,000 x $0.25] $1,337,500
Dividends payable-Common $1,337,500
[To record declaration of cash dividends]
Dec 31 Income summary $1,450,000
Retained earnings $1,450,000
[To close net income]
Retained earnings $9,537,500
Cash dividends [500000+1337500] $1,837,500
Stock dividends $7,700,000
[To close dividends]

B.

Leveon James
Balance sheet (Partial)
At December 31,2018
Stockholders' Equity:
Paid-in capital:
Common stock [5,350,000 x $5 par] $26,750,000
Additional paid in capital Common stock [3,000,000 + 5,950,000] $8,950,000
Total paid in capital $35,700,000
Retained earnings [8750000+1450000-9537500] $662,500
Total stockholders' equity $36,362,500

Calculations:

Common shares Par
Beginning 1,000,000 $10
After stock split [1,000,000 x 5] 5,000,000 $5
Stock dividend [5,000,000 x 7 %] 350,000 $5
After stock dividends 5,350,000 $5

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