Connect Access Card For Fundamental Accounting Principles
Connect Access Card For Fundamental Accounting Principles
24th Edition
ISBN: 9781260158526
Author: John J Wild
Publisher: McGraw-Hill Education
Question
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Chapter 13, Problem 2GLP
To determine

Concept Introduction:

Journal entries are medium of recording a financial transaction which occurred during an accounting period. The declaration of cash dividends is recorded by debiting the retained earnings and crediting the cash dividend payable account and stock dividends is declared by debiting the retained earnings and crediting the stock dividend distributable account.

Requirement 1:

To Journalize:

The journal entries related to cash dividends and stock dividends.

Expert Solution
Check Mark

Answer to Problem 2GLP

    Date Accounts Debit Credit
    Jan. 5Retained Earnings$20,000
    Common Dividend Payable $20,000
    Apr. 5Retained Earnings$18,500
    Common Dividend Payable $18,500
    July 5Retained Earnings$18,500
    Common Dividend Payable $18,500
    July, 31Retained Earnings $88,800
    Common Stock Dividend Distributable$29,600
    Paid In Capital in Excess of Par Value,

    Common Stock

    $59,200
    Aug. 14Common Stock Dividend Distributable $29,600
    Common Stock$29,600
    Oct. 5Retained Earnings$22,200
    Common Dividend Payable $22,200

Explanation of Solution

    Computations
    Jan. 540,000 shares X $0.50 per share cash dividend = $20,000
    Apr. 537,000 shares X $0.50 per share cash dividend = $18,500
    July 537,000 shares X $0.50 per share cash dividend = $18,500
    Oct. 544,400 shares X $0.50 per share cash dividend = $22,200

  Stock Dividend = Outstanding Shares ( Mar.20) × 20%                          = 37,000 shares ×  20 100                          = 7,400

To determine

Concept Introduction:

Outstanding shares are the shares held by the investors of the company. The number of outstanding shares is determined by deducting the number of treasury stock from the number of issued shares.

Requirement 2:

Compute the number of outstanding shares?

Expert Solution
Check Mark

Answer to Problem 2GLP

The number of shares outstanding at December 31 is 44,400.

Explanation of Solution

    ParticularsNumber of Shares
    Outstanding Shares as of January 140,000
    Less: Treasury Stock (Mar. 20)3,000
    Outstanding Shares as of March 2037,000
    Add: 20% Stock Dividend7,400
    Number of Outstanding Shares as of December 3144,400
To determine

Concept Introduction:

Net income is the difference between the revenues earned and expenses incurred during an accounting period.

Requirement 3:

Compute the amount of net income?

Expert Solution
Check Mark

Answer to Problem 2GLP

The amount of net income during the year is $248,000.

Explanation of Solution

    ParticularsAmount
    Retained Earnings as of December 31$400,000
    Add: Total Amount of Cash Dividends Declared79,200
    Total Amount of Stock Dividend Declared88,800168,000
    Subtotal 568,000
    Less: Retained Earnings as of January 1320,000
    Net Income during the year$248,000
To determine

Concept Introduction:

Retained Earnings is the amount of net income retained by the business organization.

Requirement 4:

Compute the amount of retained earnings to be capitalized as a result of the stock dividend?

Expert Solution
Check Mark

Answer to Problem 2GLP

The amount of stock dividend capitalized is $88,800.

Explanation of Solution

    ParticularsNumber of Shares
    Outstanding Shares as of January 140,000
    Less: Treasury Stock (Mar. 20)3,000
    Outstanding Shares as of March 2037,000

  Stock Dividend = Outstanding Shares ( Mar.20) × 20%                          = 37,000 shares ×  20 100                          = 7,400

Amount of Retained Earnings Capitalized

   = Number of Stock Dividend × Market Value = 7,400 × $12 per share  = $88,800

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Chapter 13 Solutions

Connect Access Card For Fundamental Accounting Principles

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