Financial Accounting: An Integrated Statements Approach, 2nd Edition

Chapter 11 Stockholders’ Equity: Capital Stock and Dividends 525

The following selected transactions occurred during the year:

Jan. 19 Paid cash dividends of $0.60 per share on the common stock. The dividend had been

properly recorded when declared on December 28 of the preceding fiscal year for

$31,500.

Feb. 2 Sold all of the treasury stock for $150,000.

Mar. 15 Issued 20,000 shares of common stock for $480,000.

July 30 Declared a 2% stock dividend on common stock, to be capitalized at the market price of

the stock, which is $25 a share.

Aug. 30 Issued the certificates for the dividend declared on July 30.

Oct. 10 Purchased 5,000 shares of treasury stock for $105,000.

Dec. 30 Declared a $0.50-per-share dividend on common stock.

In addition, net income was $182,500 for the year.

Instructions

1. Enter the January 1 balances in T-accounts for the stockholders’ equity accounts listed. Also
   prepare T-accounts for the following: Paid-In Capital from Sale of Treasury Stock; Stock
   Dividends Distributable.


2. Journalize the entries to record the transactions, and post to the six selected accounts.


3. Prepare a retained earnings statement for the year ended December 31, 2007.


4. Prepare the Stockholders’ Equity section of the December 31, 2007, balance sheet.

Serra do Mar Corporation manufactures and distributes leisure clothing. Selected transactions

completed by Serra do Mar during the current fiscal year are as follows:

Jan. 8 Split the common stock 3 for 1 and reduced the par from $18 to $6 per share. After the

split, there were 600,000 common shares outstanding.

Mar. 20 Declared semiannual dividends of $1 on 20,000 shares of preferred stock and $0.14 on

the 600,000 shares of $10 par common stock to stockholders of record on March 31,

payable on April 20.

Apr. 20 Paid the cash dividends.

May 8 Purchased 50,000 shares of the corporation’s own common stock at $48, recording the

stock at cost.

Aug. 2 Sold 30,000 shares of treasury stock at $56, receiving cash.

Sept. 15 Declared semiannual dividends of $1 on the preferred stock and $0.07 on the common

stock (before the stock dividend). In addition, a 1% common stock dividend was declared

on the common stock outstanding, to be capitalized at the fair market value of the

common stock, which is estimated at $52.

Oct. 15 Paid the cash dividends and issued the certificates for the common stock dividend.

Instructions

Journalize the transactions.

4. Total stockholders’ equity,
   $1,796,950

GENERAL LEDGER

Problem 11-5A

Entries for selected corporate
transactions

Goals3, 4, 5, 7

GENERAL LEDGER

Da Show Inc. owns and operates movie theaters throughout Texas and California. Da Show has

declared the following annual dividends over a six-year period: 2003, $18,000; 2004, $54,000;

2005, $70,000; 2006, $75,000; 2007, $80,000; and 2008, $90,000. During the entire period, the out-

standing stock of the company was composed of 20,000 shares of cumulative, 2% preferred

stock, $100 par, and 25,000 shares of common stock, $10 par.

ALTERNATE ACCOUNTING APPLICATION PROBLEMS

Alternate Problem
11-1B

Dividends on preferred and
common stock