Question

Problem 14-2A (Part Level Submission) The stockholders' equity accounts of Karp Company at January 1, 2017, are as follows: Preferred Stock, 696, $50 par Common Stock, $5 par Paid-in Capital in Excess of Par-Preferred Stock Paid-in Capital in Excess of Par-Common Stock Retained Earnings $590,000 805,000 198,500 310,500 844,000 There were no dividends in arrears on preferred stock. During 2017, the company had the following transactions and events. July 1 Aug. 1 Sept. 1 Dec. 1 15 31 31 Declared a $0.60 cash dividend per share on common stock. Discovered $28,000 understatement of depreciation expense in 2016. (Ignore income taxes.) Paid the cash dividend declared on July 1. Declared a 15% stock dividend on common stock when the market price of the stock was $17 per share. Declared a 6% cash dividend on preferred stock payable January 15, 2018. Determined that net income for the year was $368,00o. Recognized a $190,000 restriction of retained earnings for plant expansion. ▼ (a) t titles n the order presented in t are automatically r the amounts. Record jou Date Account Titles and Explanation Debit

Answer 1

Solution:

Journal Entry - Karp Corporation
Date	Particulars	Debit	Credit
1-Jul	Cash Dividends Dr	$96,600.00
	To Dividend Payable ($805,000/5*$0.60)		$96,600.00
	(To record dividend declared)
1-Aug	Retained earnings Dr	$28,000.00
	To Accumulated depreciation		$28,000.00
	(To record depreciation related to prior periods)
1-Sep	Dividend Payable Dr	$96,600.00
	To Cash		$96,600.00
	(To record dividend payment)
1-Dec	Stock dividend Dr (161000*15%*$17)	$410,550.00
	To Common stock dividend distributable (161000*15%*$5)		$120,750.00
	To Paid in capital in excess of par - common stock (161000*15%*$12)		$289,800.00
	(To record stock dividend declared)
15-Dec	Cash Dividends Dr ($590,000*6%)	$35,400.00
	To Dividend Payable		$35,400.00
	(To record dividend declared on preferred stock)
31-Dec	Income summary Dr	$368,000.00
	To Retained earnings		$368,000.00
	(Being income closed to retained earnings)
31-Dec	Retained earnings Dr	$190,000.00
	To Appropriated retained earnings		$190,000.00
	(Being retained earnings restricted for plant expansion)
31-Dec	Retained earnings Dr	$542,550.00
	To Cash Dividend		$132,000.00
	To Stock dividend		$410,550.00
	(To close dividend to retained earnings)