Question

horngren

> Continuing Problem P13-54 Journalizing stock issuances, cash dividends, and stock dividends, preparing stockholders' equity section of balance sheet This problem continues the Canyon Canoe Company situation from Chapter 12. Amber Wilson, owner of Canyon Canoe Company, decides to start a new company that will be operated as a corporation, Outdoor Equipment Incorporated (OET). This company will sell outdoor clothing and equipment Canyon Canoe Company had the following select transactions in 2021: Jan. 1 Issued 50,000 shares of $1 par value common stock for a total of $200,000. 10 Issued 20,000 shares of 4%, $3 par value preferred stock in exchange for land with a market value of $70,000. Dec. 15 Declared total cash dividends of $15,000. 20 Declared an 8% common stock dividend when the market value of the stock was $4.50 per share. 31 Paid the cash dividends. 31 Distributed the stock dividend. Requirements 1. Journalize the transactions 2. Calculate the balance in Retained Earnings on December 31, 2021. Assume net income for the year was $417,000 3. Prepare the stockholders' equity section of the balance sheet as of December 31, 2021. ALI Together Case 13-1 ssignment review the Tying It All Together feature in the chapter. It will also be helpful if you review Facebook's tps://s21.q4cdn.com/399680738/files/doc financials/annual_reports/2015-Annual Report.pdf). a mobile application and Web site that enables people to connect, share, discover, and communicate with each y also owns Instagram, messenger, WhatsApp, and Oculus vidend Policy) of the 2015 annual report. Has Facebook ever paid a dividend? Provide the company's reasoning ce sheet for Facebook. What is the par value of its Class A common shares. ave any treasury stock? How do you know?

Answer 1

According to the requirement of the question, we have to record the journal entries, calculate the balance in Retained Earnings and Stockholder's equity section of the balance sheet.

Requirement 1:- Journalize the transactions.

Jan 1. Issued 50,000 shares of $1 par value common stock for a total of $200,000

Date	Accounts Titles and Explanation	Debit ($)	Credit ($)
Jan 1	Cash	$200,000
	Common Stock - $1 par value		$50,000
	Paid-in-Capital in Excess of par-Common		$150,000
	(Issued common stock at a premium)

Jan 10. Issued 20,000 shares of 4%,$3 par value preferred stock in exchange for market value of $70,000.

Date	Accounts Titles and Explanation	Debit ($)	Credit ($)
Jan 10	Land	$70,000
	Preferred Stock - $3 par value (20,000 * $3)		$60,000
	Paid-in-Capital in Excess of par-Preferred		$10,000
	(Issued preferred stock in exchange of land)

Dec 15. Declared total cash dividends of $15,000.

Date	Accounts Titles and Explanation	Debit ($)	Credit ($)
Dec 15	Cash Dividends	$15,000
	Dividend Payable-Preferred ($60,000 * 4%)		$2,400
	Dividend Payable-Common		$12,600
	(Declared a cash dividend)

Dec 20. Declared an 8% common stock dividend when the market value of the stock was $4.50 per share.

Date	Accounts Titles and Explanation	Debit ($)	Credit ($)
Dec 20	Stock Dividends (Working Note)	$66,960
	Common stock Dividend Distributable ($186,000 * 4%)		$14,880
	Paid-in-Capital in Excess of par-Common		$52,080
	(Declared an 8% stock dividend)

Note:- There is opening Balance of Common Stock on January 1, 2021 i.e. $136,000

Calculation of Stock Dividends = $136,000 + $50,000 = $186,000

=$186,000 * $4.5 per share = $837,000

= $837,000 * 8% = $66,960

Dec 31. Paid the Cash Dividends.

Date	Accounts Titles and Explanation	Debit ($)	Credit ($)
Dec 31	Dividend payable - Preferred	$2,400
	Dividend payable - Common	$12,600
	Cash		$15,000
	(Payment of Cash dividend)

Dec 31. Distributed the Stock dividend.

Date	Accounts Titles and Explanation	Debit ($)	Credit ($)
Dec 31	Common Stock Dividend Distributable (Calculated Above)	$14,880
	Common Stock - $1 Par Value		$14,880
	(Issued 8% Stock Dividend)

Requirement 2:- Calculate the balance in  retained earnings on December 31, 2021. Assume net income for the year was $417,000.

Retained Earnings, Jan. 1, 2021	(if any)
Add: Net income	$417,000
Less: Cash Dividend Declared	$(15,000)
Less: Stock Dividend Declared	$(66,960)
Retained Earnings, Dec. 31, 2021	$335,040

Note: If there is any opening balance of retained earning is given in question, we have to add in the net income.

Requirement 3:- Prepare the stockholder's equity section of the balance sheet as of December 31, 2021.

Canyon Canoe Company

Balance Sheet (partial)

December 31, 2021

Paid-in-Capital
Preferred Stock - 4%, $3 per value;
20,000 shares issued and outstanding	$60,000
Paid-in Capital Excess of Par - Preferred	$10,000
Common Stock - $1 par value;
(186,000 + $14,880 )	$200,880
Paid-in Capital in Excess of Par-Common ($150,000 + $52,080)	$202,080
Total Paid-in Capital	$472,960
Retained Earnings	$335,040
Total Stockholder's Equity	$808,000

Thank you..

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