Question

On January 1 Weiss Corporation had 75,000 shares of $0.5 par value common stock issued and outstanding. During the year, the following transactions occurred.

Apr. 1 Issued 8,000 additional shares of common stock for $11 per share.

June 15 Declared a cash dividend of $1.50 per share to stockholders of record on June 30.

July 10 Paid the $1.50 cash dividend.

Dec. 1 Issued 4,000 additional shares of common stock for $12 per share.

Dec. 15 Declared a cash dividend on outstanding shares of $1.70 per share to stockholders of record on December 31.

(a) Prepare the entries for the above transactions.

(b) How are dividends and dividends payable reported in the financial statements prepared at December 31?

Answer 1

Question A

Journal Entries

Date	Particulars	Debit	Credit
Apr01	Cash A/C..Dr	88,000
	To Common Stock		4,000
	To Paid in Capital in Excess of Par Value - Common Stock		84,000
	(Being Common Stock issued)
Jun15	Retained Earnings A/C..Dr	124,500
	To Dividends Payables		124,500
	(Being Dividends Declared)
Jul10	Dividend Payable A/C..Dr	124,500
	To Cash A/C		124,500
	(Being Dividends paid declared on Jun 15)
Dec01	Cash A/C..Dr	48,000
	To Common Stock		2,000
	To Paid in Capital in Excess of Par - Common Stock		46,000
	(Being Common Stock issued)
Dec15	Retained Earnings A/C..Dr	147,900
	To Dividends Payables		147,900
	(Being Dividends Declared)

Notes

For Apr 01 Transaction

Cash Received = 8,000 Shares * $ 11 per Share = $ 88,000

Common Stock Par Value = 8,000 Shares * $ 0.5 per Share = $ 4,000

Additional Paid in Capital in Excess of Par = 88,000 - 4,000 = $ 84,000

For June 15 Transaction

Dividend Declared = 83,000 Shares * $ 1.5 per Share = $ 124,500

Shares = 75,000 + 8,000 (Issued on April 01) = 83,000 Shares

For Dec 01

Cash Received = 4,000 Share * $ 12 per Share = $ 48,000

Common Stock = 4,000 Shares * $ 0.5 per Share = $ 2,000

Paid in Capital in Excess of Par over Common Stock = 48,000 - 2,000 = $ 44,000

For Dec 15

Dividend Declared = 87,000 Shares * $ 1.70 per Share = $ 147,900

Shares = 83,000 + 4,000(Shares Issued in Dec 01) = 87,000 Shares

Question 2

Dividend Payable should be reported as Current Liabilities heading of Balance Sheet prepared at December 31.

Dividend should be deducted from Retained Earnings in the Stockholders Equity Section of Balance Sheet.