Question

On January 1, 2020, Sheridan Corporation had the following stockholders' equity accounts. 

Common Stock ($22 par value, 53,500 shares issued and outstanding) $1,177,000 

Paid-in Capital in Excess of Par-Common Stock 191,000

Retained Earnings 631,000 

During the year, the following transactions occurred. 

Feb. 1 Declared a 3 cash dividend per share to stockholders of record on February 15, payable March 1. 

Mar. 1 Paid the dividend declared in February 

Apr. 1 Announced a 2-for-1 stock split. Prior to the split, the market price per share was $38. 

July 1 Declared a 10% stock dividend to stockholders of record on July 15, distributable July 31. On July 1, the market price of the stock was $15 per share. 

31 issued the shares for the stock dividend. 

Dec. 1 Declared a 50.30 per share dividend to stockholders of record on December 15, payable January 5, 2021 

31 Determined that net income for the year was $367,500. 

Journalize the transactions and the closing entries for net income and dividends. 

Answer 1

Part A

Date	Account titles and explanation	Debit	Credit
Feb. 1	Retained earnings (53500*3)	160500
	Dividends payable		160500
Mar. 1	Dividends payable	160500
	Cash		160500
Apr. 1	Memo—two-for-one stock split increases number of shares to 107000 = (3500 X 2) and reduces par value to $11 per share
July 1	Retained Earnings (107000*10%*15)	160500
	Common Stock Dividends   Distributable (107,000*10%* $11)		117700
	Paid-in Capital in Excess of   Par Value—Common Stock   (107000 *10%* $4)		42800
May 15	Common Stock Dividends Distributable	117700
	Common Stock (107,000 X $11)		117700
Dec. 31	Retained Earnings (107000+10700)*0.30	35310
	Dividends Payable		35310
Dec. 31	Income Summary	367500
	Retained Earnings		367500

Part B

Common stock
Date	Explanation	Ref.	Debit	Credit	Balance
Jan. 1	Balance				1177000
Apr. 1	2 for 1 split—new par $11
July 31				117700	1294700

Common Stock Dividends Distributable
Date	Explanation	Ref.	Debit	Credit	Balance
July 1				117700	117700
July 31			117700		0

Paid-in Capital in Excess of Par – common stock
Date	Explanation	Ref.	Debit	Credit	Balance
Jan. 1	Balance				191000
July 1				42800	233800

Retained earnings
Date	Explanation	Ref.	Debit	Credit	Balance
Jan. 1	Balance				631000
Feb. 1	Cash dividend			160500	791500
July 1	Stock dividend			160500	952000
Dec. 1	Cash dividend			35310	987310
Dec. 31	Net income			367500	1354810

Cash dividend
Date	Explanation	Ref.	Debit	Credit	Balance
Feb. 1			160500
Dec. 1			35310
Dec. 31				195810	0

Stock dividends
Date	Explanation	Ref.	Debit	Credit	Balance
July 1			160500
Dec. 31				160500	0

Part C

SHERIDAN CORPORATION Partial Balance Sheet December 31, 2020
Stockholders’ equity
Paid-in capital
Capital stock
Common stock	1294700
Additional paid-in capital
Paid-in capital in excess of par value	233800
Total paid-in capital	1528500
Retained earnings	1354810
Total stockholders’ equity	$2883310