Question

em 2. On January 1, 2012, Kristen Corporation had the following stockholders' equity accounts. Common Stock ($20 par value, 60,000 shares issued and outstanding) $1,200,000 Paid-in Capital in Excess of Par-Common Stock 200,000 Retained Earnings 600,000 During the year, the following transactions occurred. Feb. 1 Declared a $1 cash dividend per share to stockbolders of record on February 15, pay. able 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 $36. 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 $13 per share. 31 Issued the shares for the stock dividend. Dec. 1 Declared a $0.50 per share dividend to stockholders of record on December 15, pay- able January 5, 2013. 31 Determined that net income for the year was $350,000. Instructions (a) Journalize the transactions and the closing entry for net income. b) Enter the beginning balances, and post the entries to the stockholders' equity accounts (Note: Open additional stockholders' equity accounts as needed.) – BLANK PAPER (c) Prepare a stockholders' equity section at December 31. a po Below

Answer 1

a.

Date	Account title and explanation	Debit	Credit
Feb 1	Retained earnings [60,000 x $1]	$60,000
	Dividends payable		$60,000
	[Declared cash dividends]
Mar 1	Dividends payable	$60,000
	Cash		$60,000
	[Paid cash dividends]
Apr 1	No entry for stock-split
July 1	Retained Earnings	$156,000
	Common Stock dividend distributable [12,000 x $10]		$120,000
	Paid-in Capital in Excess of Par-Common [12,000 x $3]		$36,000
	[Declared stock dividends]
July 31	Common Stock dividend distributable	$120,000
	Common stock		$120,000
	[Paid stock dividends]
Dec 31	Retained earnings	$66,000
	Dividends payable [132,000 x $0.50]		$66,000
	[Declared cash dividends]
Dec 31	Income summary	$350,000
	Retained earnings		$350,000
	[To close income summary account]

b.

Common stock
		Beg.	$1,200,000
		July 31	$120,000
		End.	$1,320,000
Paid-in capital in excess of par-common stock
		Beg.	$200,000
		July 1	$36,000
		End.	$236,000
Retained earnings
Feb 1	$60,000	Beg.	$600,000
July 1	$156,000	Dec 31	$350,000
Dec 31	$66,000
		End.	$668,000

c.

Kristen Corporation
Balance Sheet (partial)
For the year ended December 31,2012
Stockholder's equity :
Common stock $10 par, 132,000 shares issued and outstanding	$1,320,000
Paid-in capital in excess of par-common	$236,000
Total paid in capital	$1,556,000
Retained earnings	$668,000
Total stockholder's Equity	$2,224,000

Calculations:

	Outstanding Common shares
Beginning	60,000
Stock split	1:02
Shares after stock split (60,000 x 2)	120,000
Stock dividend (120,000 x 10%)	12,000
Shares after stock dividend	132,000

*Upon stock split, par value is decreased to $10.