Question

P13-2

Required: pare journal entries for each for each of the the m 1.800 .-1 P13-1 12501 At December 31, 200 Common stock, $10 na During 2005, the follow April 1 Issue May 1 te was $42.sued a 10% 2004. Volleyballs'R' Us Corp. reported the followingin ck, $10 par value, 200.000 shares wed and 5. the following equity transactions occue Issued 200000 shares of common oc h Declared and issued a 10% stock dividend price on the issue was $42 per share. Santember 1 Declared and issued a 4-forstock Purchased 50,000 shares at 545 per share of commen them in the treasury. e 1.2000 hon stock October 1 00 for are of c e Required: a. Prepare journal entries where re h Complete the following table. Indicate the ima * $28 urpal entries where required for all 2005 transactions following table. Indicate the impact of each of the transactions on the pany's assets, liabilities, and equity. Use I for Increase, D for Decrease in NE for No effect. Assets Liabilities Equity 'Transaction April 1 May 1 September 1 October 1 + S Determine the number of shares that will be outstanding on December 31, 2005 P13-2 The following was extracted from the balance of Bledsoe Corp. at December 31, 2004: Stockholders' Equity (amounts in thousands, except share amounts) 8% Cumulative preferred stock, $100 par, 500,000 shares authorized, 300,000 shares issued $ 30,000 Common stock, $10 par value, 2,000,000 15,000 shares authorized, 1,500,000 shares issued 40,000 Additional paid-in capital 58,000 Retained earnings $143,000 (1,500 $141,500 Less common treasury shares, 300,000 shares at cost Total stockholders' equity

Answer 1

P13-2

a. Annual preferred dividend = 8% x $30,000,000 = $2,400,000

Total Dividend-2004		2000000
Dividend to preferred stockholders:
Dividend in arrears	0
Current year dividend	2000000
Total dividend to preferred stockholders		2000000
Dividend to common stockholders		0

Preferred dividend in arrears = $2400000 - $2000000 = $400000

2005
Dividend to preferred stockholders:
Dividend in arrears	400000
Current year dividend	2400000
Total dividend to preferred stockholders		2800000
Dividend to common stockholders*		2400000
Total dividend $		5200000

*Dividend to common stockholders = $2 x (1500000 - 300000) = $2400000

Dividend is not paid on the treasury shares.

Bledsoe would need to declare a total dividend of $5200000 in 2005.

b. Number of shares of stock dividend = 25% x (1500000 - 300000) = 300000

	Effect-Increase (Decrease)
Common stock (300000 x $10)	3000000
Additional paid-in capital (300000 x $50)	15000000
Retained earnings (300000 x $60)	-18000000
Total stockholders' equity	0

c. Only a memo entry will be recorded for the stock split reducing the par value of the common stock to $10/2 = $5 and increasing the number of common shares issued, outstanding and in treasury stock. There is however, no effect on the dollar values of common stock, additional paid-in capital, retained earnings, or treasury stock.