Question

On January 1, 2020, Pharoah Company had the following stockholders' equity accounts. Common Stock ($26 par value, 58,500 shares issued and outstanding) $1,521,000 Paid-in Capital in Excess of Par-Common Stock 192,000 Retained Earnings 622,000 During the year, the following transactions occurred. Feb. Declared a $1 cash dividend per share to stockholders of record on February 15, payable March 1. Mar. Paid the dividend declared in February. Apr. Announced a 2-for-1 stock split. Prior to the split, the market price per share was $38. July Declared a 15% stock dividend to stockholders of record on July 15, distributable July 31. On July 1, the market price of the 1 stock was $14 per share. 31 Issued the shares for the stock dividend. Dec. Declared a $0.40 per share dividend to stockholders of record on December 15, payable January 5, 2021. 31 Determined that net income for the year was $359,000.

Answer 1

Pharoah Corporation				-
Date	Account	Debit	Credit	Calculation
1-Feb	Cash Dividends	58,500		=58,500*1
	Dividends Payable		58,500
1-Mar	Dividends Payable	58,500
	Cash		58,500
1-Apr	No Entry
	In Stock split, only par value per share changes to $13 per share (half of $26 par)
1-Jul	Stock Dividends	245,700		=17,550*14
	Common Stock Dividend Distributable		228,150	=17,550*13
	Paid-in Capital in Excess of Par—Common Stock		17,550
31-Jul	Common Stock Dividend Distributable	228,150
	Common Stock		228,150
1-Dec	Cash Dividends	53,820		Below wkgs
	Dividends Payable		53,820
31-Dec	Income Summary	359,000
	Retained Earnings		359,000
31-Dec	Retained Earnings	245,700
	Stock Dividends		245,700
31-Dec	Retained Earnings	112,320		=58,500+53,820
	Cash Dividends		112,320
	Workings
	Cash Dividends
	Opening Shares	58,500
	Stock Split - 2 for 1	58,500
	Subtotal	117,000
	15% Stock Dividends	17,550		=117,000*15%
	Number of Common Shares Issued	134,550
	Cash Dividend per share	0.40
	Cash Dividend Declared	53,820		=134,550*0.40

Pharoah Corporation T Accounts Date Debit Credit Common Stock $1,521,000 31-Jul $ 228,150 Op bal Balance Date Debit Credit Balance Date Debit Credit Balance Paid-in Capital in Excess of Par-Common Retained Earnings $1,521,000 Op bal $ 192,000 $ 192,000 Op bal $ 622,000 $ 622,000 $1,749,150 1-Jul $ 17,550 $ 209,550 31-Dec $ 359,000 $ 981,000 31-Dec $ 245,700 $ 735,300 31-Dec $ 112,320 $ 622,980 Stock Dividends Common Stock Dividend Distributable $ 58,500 1-Jul $245,700 $ 245,700 1-Jul $ 228,150 $ 228,150 $ 112,320 31-Dec $ 245,700 $ - 31-Jul $ 228,150 $ 1-Feb $ 1-Dec $ 31-Dec Cash Dividends 58,500 53,820 $ 112,320

Pharoah Corporation Partial Balance Sheet As of December 31, 2020 1,749,150 Stockholders Equity Paid in Capital Capital Stock Common Stock ($13 par value, 134,550 shares issued and outstanding) Additional Paid in Capital Paid-in Capital in Excess of Par-Common Stock Total Paid in Capital Retained Earnings Total Stockholders Equity 209,550 1,958,700 622,980 2,581,680