Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN: 9781337788281
Author: James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher: Cengage Learning
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Textbook Question
Chapter 16, Problem 5P
Alert Company’s shareholders’ equity prior to any of the following events is as follows:
The company is considering the following alternative items:
- 1. An 8% stock dividend on the common stock when it is selling for $30 per share.
- 2. A 30% stock dividend on the common stock when it is selling for $32 per share.
- 3. A special stock dividend to common shareholders consisting of 1 share of
preferred stock for every 100 shares of common stock. The preferred stock and common stock are selling for $123 and $31 per share, respectively. - 4. A 2-for-1 stock split on the common stock, reducing the par value to $5 per share (assume the same date for declaration and issuance). The market price is $30 per share on the common stock.
- 5. A property dividend to common shareholders consisting of 100 bonds issued by West Company. These bonds are carried on the Alert Company books as an available-for sale investment at a fair value of $48,000 (which is also its cost); it has a current value of $54,000.
- 6. A cash dividend, consisting of a normal dividend and a liquidating dividend, on both the preferred and the common stock. The 10% preferred dividend includes a 2% liquidating dividend, and the $2.30 per share common dividend includes a $0.30 per share liquidating dividend (separate liquidating dividend contra accounts should be used).
Required:
For each of the preceding alternative items:
- 1. Record (a) the
journal entry at the date of declaration and (b) the journal entry at the date of issuance. - 2. Compute the balances in the shareholders’ equity accounts immediately after the issuance (any gains or losses are to be reflected in the
retained earnings balance; ignore income taxes).
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Chapter 16 Solutions
Intermediate Accounting: Reporting And Analysis
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