Acc226 Fundamental of Accounting Principles: Week 4 (QS13-2, QS13-4, QS13-5, E13-3, E13-7)

Acc226 Fundamental of Accounting Principles 

Week 4 Check Point: Stock Issuances, Dividends, and Splits 
Complete Quick Study questions QS 13-2, QS 13-4, QS 13-5 on p. 528. 

QS 13-2 
Prepare the journal entry to record each separate transaction. 
(a) On March 1, DVD Co. issues 44,500 shares of $4 par value common stock for $255,000 cash. 
(b) On April 1, GT Co. issues no-par value common stock for $50,000 cash. 
(c) On April 6, MTV issues 2,000 shares of $20 par value common stock for $35,000 of inventory, $135,000 of machinery, and acceptance of a $84,000 note payable. 

QS 13-4 
Prepare journal entries to record the following transactions for Skylar Corporation: 
May 15 declared a $48,000 cash dividend payable to common stockholders. 
July 31 paid the dividend declared on May 15. 

QS 13-5 
The stockholders’ equity section of Catalina Company’s balance sheet as of April 1 follows. On April 2, Catalina declares and distributes a 10% stock dividend. The stock’s per share market value on April 2 is $25. 
Common stock—$5 par value, 375,000 shares 
    Authorized, 150,000 shares issued and outstanding 750,000 
Contributed capital in excess of par value, common stock 352,500 
Total contributed capital 1,102,500 
Retained earnings 633,000 
Total stockholders’ equity 1,735,500 
Prepare the stockholders’ equity section immediately after the stock dividend. 

Week 4 Check Point: Recording and Calculating Stocks 
Complete Exercises 13-3 and 13-7 on pp. 529 and 530. 

Exercise 13-3 Recording Stock Issuances 
Prepare journal entries to record the following four separate issuances of stock: 
1. Two thousand shares of no-par common stock are issued to the corporation’s promoters in exchange for their efforts, estimated to be worth $30,000. The stock has no stated value. 
2. Two thousand shares of no-par common stock are issued to the corporation’s promoters in exchange for their efforts, estimated to be worth $30,000. The stock has a $1 per share stated value. 
3. Four thousand shares of $10 par value common stock are issued for $70,000 cash. 
4. One thousand Shares of $100 par value preferred stock are issued for $120,000 cash. 

Exercise 13-7 
On June 30, 2005, Scizzory Corporation’s common stock is priced at $31 per share before any stock dividend or split, and the stockholders’ equity section of its balance sheet appears as follows: 
Common stock—$10 par value, 60,000 shares 
    Authorized, 25,000 shares issued and outstanding 250,000 
Contributed capital in excess of par value, common stock 100,000 
Total contributed capital 350,000 
Retained earnings 330,000 
Total stockholders’ equity 680,000 
1. Assume that the company declares and immediately distributes a 100% stock dividend. This event is recorded by capitalizing retained earnings equal to the stock’s par value. Answer these questions about stockholders’ equity as it exists after issuing the new shares: 
    a. What is the retained earnings balance? 
    b. What is the amount of total stockholders’ equity? 
    c. How many shares are outstanding? 
2. Assume that the company implements a 2-for-1 stock split instead of the stock dividend in part1. 
Answer these questions about stockholders’ equity as it exists after issuing the new shares: 
    a. What is the retained earnings balance? 
    b. What is the amount of total stockholders’ equity? 
    c. How many shares are outstanding? 
3. Explain the difference, if any, to a stockholder from receiving new shares distributed under a large stock dividend versus a stock split.  
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