Question

Part A In late 2017, the Nicklaus Corporation was formed. The corporate charter authorizes the issuance of 6,000,000 shares of common stock carrying a $1 par value, and 2,000,000 shares of $5 par value, noncumulative, nonparticipating preferred stock. On January 2, 2018, 4,000,000 shares of the common stock are issued in exchange for cash at an average price of $10 per share. Also on January 2 all 2,000,000 shares of preferred stock are issued at $25 per share. Required: 1. Prepare journal entries to record these transactions 2. Prepare the shareholders' equity section of the Nicklaus balance sheet as of March 31, 2018. (Assume net income for the first quarter 2018 was $1.900,000.) Part B During 2018, the Nicklaus Corporation participated in three treasury stock transactions: a. On June 30, 2018, the corporation reacquires 280,000 shares for the treasury at a price of $12 per share. b. On July 31, 2018, 40,000 treasury shares are reissued at $15 per share. c. On September 30, 2018, 40,000 treasury shares are reissued at $10 per share. Required: 1. Prepare journal entries to record these transactions 2. Prepare the Nicklaus Corporation shareholders' equity section as it would appear in a balance sheet prepared at September 30, 2018. (Assume net income for the second and third quarter was $3,400,000.) Part C On October 1, 2018. Nicklaus Corporation receives permission to replace its $1 par value common stock (6,000,000 shares authorized, 4,000,000 shares issued, and 3,800,000 shares outstanding) with a new common stock issue having a $.50 par value. Since the new par value is one-half the amount of the old, this represents a 2-for-1 stock split. That is, the shareholders will receive two shares of the $.50 par stock in exchange for each share of the $1 par stock they own. The $1 par stock will be collected and destroyed by the issuing corporation On November 1, 2018, the Nicklaus Corporation declares a $0.21 per share cash dividend on common stock and a $0.38 per share cash dividend on preferred stock. Payment is scheduled for December 1, 2018, to shareholders of record on November 15, 2018 On December 2, 2018, the Nicklaus Corporation declares a 1% stock dividend payable on December 28, 2018, to shareholders of record on December 14. At the date of declaration, the common stock was selling in the open market at $10 per share. The dividend will result in 76,000 (0.01 7600,000) additional shares being issued to shareholders.

answer part B and C

Answer 1

Part B :

1:

Date	General Journal	Debit	Credit
		$	$
June 30, 2018	Treasury Stock ( 280,000 x $ 12 )	3,360,000
	Cash		3,360,000
July 31, 2018	Cash ( 40,000 x $ 15 )	600,000
	Treasury Stock ( 40,000 x $ 12 )		480,000
	Paid-in Capital: Share Repurchase		120,000
September 30, 2018	Cash ( 40,000 x $ 10 )	400,000
	Paid-in Capital : Share Repurchase	80,000
	Treasury Stock ( 40,000 x $ 12 )		480,000

2.

Nicklaus Corporation Balance Sheet : Shareholders Equity Section September 30, 2018
Shareholders Equity
Preferred Stock	$ 10,000,000
Common Stock	4,000,000
Paid-in Capital: Excess of Par	76,000,000
Paid-in Capital : Share Repurchase	40,000
Retained Earnings	5,300,000
	95,340,000
Less: Treasury Stock	(2,400,000)
Total Shareholders Equity	$ 92,940,000

Part C :

1:

Date	General Journal	Debit	Credit
		$	$
Oct 1, 2018	Common Stock : $ 1 par value	4,000,000
	Common Stock: $ 0.50 par value		4,000,000
Nov 2, 2018	Retained Earnings	2,356,000
	Dividends Payable : Common Stock ( 4,000,000 - 200,000 ) * 2 x $ 0.21		1,596,000
	Dividends Payable: Preferred Stock		760,000
Dec 1, 2018	Dividends Payable: Preferred Stock	760,000
	Dividends Payable: Common Stock	1,596.000
	Cash		2,356,000
Dec 2, 2018	Retained Earnings ( 7,600,000 shares * 1 % x $ 10 )	760,000
	Common Stock Dividend Distributable ( 7,600,000 * 1 % * $ 0.50)		38,000
	Paid-in Capital : Excess of Par		722,000
Dec 28, 2018	Common Stock Dividend Distributable	38,000
	Common Stock		38,000

2.

Nicklaus Corporation Balance Sheet: Shareholders Equity Section December 31, 2018 Shareholders Equity
Preferred Stock	10,000,000
Common Stock	4,038,000
Paid-in Capital : Excess of Par	76,722,000
Paid-in Capital : Share Repurchase	40,000
Retained Earnings	5,084,000
	95,884,000
Treasury Stock	(2,400,000)
Total Shareholders Equity	$ 93,484,000