Question

CP13-54 (similar to) After looking into debt financing through​ notes, mortgage, and bonds​ payable, Outdoor Adventure Company decides to raise additional capital for a planned business expansion. The company will be able to acquire cash as well as land adjacent to its current business location. Before the following​ transactions, the balance in Common Stock on January​ 1, 2021 was $ 170 000 and included 170 000 shares of common stock issued and outstanding.​ (There was no​ Paid-In Capital in Excess of Par l​Common.) Outdoor Adventure Company had the following transactions in 2021​:

Jan.	1		Issued 30,000 shares of ​$1 par value common stock for a total of 180,000.
	10		Issued 10,000 shares of 3​%,10 par value preferred stock in exchange for land with a market value of 120,000.
Dec.	15		Declared total cash dividends of $30,000.
	20		Declared a 6​% common stock dividend when the market value of the stock was 7.00 per share.
	31 31		Paid the cash dividends. Distributed the stock dividend
	Distributed the stock dividend 1. Journalize the transactions. 2. Calculate the balance in Retained Earnings on December​ 31,2021. Assume the balance on January​ 1,2021 was 5,500 and net income for the year was $472,000. 3 Prepare the​ stockholders' equity section of the balance sheet as of December​ 31, 2021 There was no preferred stock issued prior to the 2021 transactions.		Distributed the stock dividend.
1.	Journalize the transactions.
2.	Calculate the balance in Retained Earnings on December​ 31, 20212021. Assume the balance on January​ 1, 20212021 was $ 5 comma 500$5,500 and net income for the year was $ 472 comma 000$472,000.
3.	Prepare the​ stockholders' equity section of the balance sheet as of December​ 31, 20212021. There was no preferred stock issued prior to the 20212021 transactions. Distributed the stock dividend

Answer 1

1.

Date	Account Titles	Debit	Credit
Jan-01	Cash	$         1,80,000
	Common stock		$          30,000	=30000*1
	Paid in capital in excess of par, Common Stock		$       1,50,000	=180000-30000
	(Issue of common stock)
Jan-10	Land	$         1,20,000
	Preferred Stock		$       1,00,000	=10000*10
	Paid in capital in excess of par, Preferred Stock		$          20,000	=120000-100000
	(Issue of preferred stock in exchange of land)
Dec-15	Retained Earnings	$            30,000
	Preferred Dividend Payable		$            3,000	=100000*3%
	Common Dividend Payable		$          27,000	=30000-3000
	(Cash dividend declared)
Dec-20	Retained Earnings	$            84,000		=(170000+30000)*6%*7
	Common Stock Dividend Distributable		$          12,000	=(170000+30000)*6%*1
	Paid in capital in excess of par, Common Stock		$          72,000	=84000-12000
	(Common Stock dividend declared)
Dec-31	Preferred Dividend Payable	$              3,000
	Common Dividend Payable	$            27,000
	Cash		$          30,000
	(Paid cash dividends)
Dec-31	Common Stock Dividend Distributable	$            12,000
	Common Stock		$          12,000
	(Common Stock issued for stock dividend)

2.

Retained Earnings
Beginning Balance	$              5,500
Add : Net Income	$         4,72,000
Less : Cash Dividends	$            30,000
Less : Stock Dividends	$            84,000
Ending Balance	$         3,63,500

3.

Stockholder's Equity
Common Stock	$         2,12,000	=170000+30000+12000
Preferred Stock	$         1,00,000
Paid in capital in excess of par, Common Stock	$         2,22,000	=150000+72000
Paid in capital in excess of par, Preferred Stock	$            20,000
Retained Earnings	$         3,63,500
Total Stockholder's Equity	$         9,17,500