Question

On January 1, 2020, Splish Brothers Inc. had the following stockholders' equity accounts. Common Stock ($10 par value, 80,300 shares issued and outstanding) $803,000 Pald-in Capital in Excess of Par-Common Stock 215,000 Retained Earnings 536,000 During the year, the following transactions occurred. Jan 15 Declared a $1.10 cash dividend per share to stockholders of record on January 31, payable February 15. Feb. 15 Paid the dividend declared in January Apr. 15 Declared a 10% stock dividend to stockholders of record on April 30. distributable May 15. On April 15, the market price of the stock was $16 per share. May 15 issued the shares for the stock dividend. July 1 Announced a 2-for-1 stock split. The market price per share prior to the announcement was $14.(The new par value is $5.) Dec. 1 Declared a $0.80 per share cash dividend to stockholders of record on December 15, payable January 10, 2021. Dec. 31 Determined that net income for the year was $290,000. Journalize the transactions and the closing entries for net income and dividends. (Record journal entries in the order presented in the problem. Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter for the amounts.) Debit Credit Date Account Titles and Explanation

Answer 1

Requirement 1: Prepare the following journal entries

Date	Account Title and explanation	Debit	Credit
Jan. 15	Cash Dividends (80,300 × $1.10)	$88,330
	Dividends Payable - Common		$88,330
	To record cash dividends declared
Feb. 15	Dividends Payable - Common	$88,330
	Cash		$88,330
	To record cash dividend paid
Apr. 15	Stock Dividends (80,300 × 10% × $16)	$128,480
	Common Stock Dividends Distributable (80,300 × 10% × $10)		$80,300
	Paid-in Capital in Excess of Par-Common Stock		$48,180
	To record stock dividend declared
May. 15	Common Stock Dividends Distributable (80,300 × 10% × $10)	$80,300
	Common Stock - $10 Par		$80,300
	To record stock dividend distributed
July 1	No journal entry is required
	A 2-for-1 stock split increases number of shares to 176,660 ((80,300 + 8,030) × 2)
	and reduces the par value of share to $5
Dec. 1	Cash Dividends (176,660 × $0.80)	$141,328
	Dividends Payable - Common		$141,328
	To record cash dividends declared
Dec. 31	Income Summary	$290,000
	Retained Earnings		$290,000
	To close net income to retained earnings
Dec. 31	Retained Earnings	$128,480
	Stock Dividends		$128,480
	To close stock dividends to retained earnings
Dec. 31	Retained Earnings	$229,658
	Cash dividends ($88,330 + $141,328)		$229,658
	To close cash dividends to retained earnings

Requirement 2: Post the entries as follows

Common Stock
Date	Explanation Ref.	Debit	Credit	Balance
Jan. 1	Balance			$803,000
May. 15			$80,300	$883,300
Jul. 1	2 for 1 split - new par $5
Common Stock Dividends Distributable
Date	Explanation Ref.	Debit	Credit	Balance
Apr. 15			$80,300	$80,300
May. 15		$80,300		$0
Paid - in Capital in Excess of Par - Common
Date	Explanation Ref.	Debit	Credit	Balance
Jan. 1	Balance			$215,000
Apr. 15			$48,180	$263,180
Retained Earnings
Date	Explanation Ref.	Debit	Credit	Balance
Jan. 1	Balance			$536,000
Dec 31	Net income		$290,000	$826,000
Dec 31	Stock dividend	$128,480		$697,520
Dec 31	Cash dividend	$229,658		$467,862
Cash Dividend
Date	Explanation Ref.	Debit	Credit	Balance
Jan. 15		$88,330		$88,330
Dec 1		$141,328		$229,658
Dec 31			$229,658	$0
Stock Dividend
Date	Explanation Ref.	Debit	Credit	Balance
Apr. 15		$128,480		$128,480
Dec 31			$128,480	$0

Requirement 3: Prepare the stockholders' equity section of balance sheet as follows

SP Inc
Balance Sheet (Partial)
December 31, 2020
Stockholders' Equity:
Paid-in capital
Common stock, $5 par value, 176,660 shares
issued and outstanding	$883,300
Additional paid-in capital
in excess of par - common stock	$263,180
Total paid-in capital	$1,146,480
Retained Earnings	$467,862
Total stockholders' equity	$1,614,342