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Chapter 15: Question 10BE (page 811)

Woolford Inc. declared a cash dividend of $1.00 per share on its 2 million outstanding shares. The dividend was declared on August 1, payable on September 9 to all stockholders of record on August 15. Prepare all journal entries necessary on those three dates.

Short Answer

Expert verified

The dividend paid by Woolford Inc. on September 9 was $2,000,000.

Step by step solution

01

Meaning of Dividend

Dividends are paid to shareholders. A dividend is an amount paid to a shareholder from the profits produced by the firm in which he holds stock. The sum is determined by the number and type of shares he holds.

02

Preparing journal Entries of Woolford Inc.

Date

Particular

Folio

Debit $

Credit $

August 1

Retained Earnings A/c(2,000,000$1)

2,000,000

Dividend Payable A/c

2,000,000

To record the payment of dividend

August 15

No entry

September 9

Dividend Payable A/c

2,000,000

Cash A/c

2,000,000

To record the payment of dividend

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Most popular questions from this chapter

(Cash Dividend and Liquidating Dividend) Lotoya Davis Corporation has 10 million shares of common stock issued and outstanding. On June 1, the board of directors voted an 80 cents per share cash dividend to stockholders of record as of June 14, payable June 3

Instructions

  1. Prepare the journal entry for each of the dates above, assuming the dividend represents a distribution of earnings.
  2. How would the entry differ if the dividend were a liquidating dividend?

(Dividends and Splits) Myers Company provides you with the following condensed balance sheet information.

Asset

Current assets \(40,000

Equipment (net) 250,000

Intangibles 60,000

Total assets \)410,000

Liabilities and Stockholders鈥� Equity

Current and long-term liabilities \(100,000

Stockholders鈥� equity

Common stock (\)5 par) \( 20,000

Paid-in capital in excess of par 110,000

Retained earnings 180,000 310,000

Total liabilities and stockholders鈥� equity \)410,000

Instructions

For each of the following transactions, indicate the dollar impact (if any) on the following five items: (1) total assets, (2) common stock, (3) paid-in capital in excess of par, (4) retained earnings, and (5) stockholders鈥� equity. (Each situation is independent.)

  1. Myers declares and pays a \(0.50 per share cash dividend.
  2. Myers declares and issues a 10% stock dividend when the market price of the stock is \)14 per share.
  3. Myers declares and issues a 30% stock dividend when the market price of the stock is \(15 per share.
  4. Myers declares and distributes a property dividend. Myers gives one share of its equity investment (ABC stock) for every two shares of Myers Company stock held. Myers owns 10,000 shares of ABC. ABC is selling for \)10 per share on the date the property dividend is declared.
  5. Myers declares a 2-for-1 stock split and issues new shares.

Weisberg Corporation has 10,000 shares of \(100 par value, 6%, preference shares and 50,000 ordinary shares of \)10 par value outstanding at December 31, 2017.

Instructions

Answer the questions in each of the following independent situations.

  1. If the preference shares are cumulative and dividends were last paid on the preference shares on December 31, 2014, what are the dividends in arrears that should be reported on the December 31, 2017, statement of financial position? How should these dividends be reported?
  2. If the preference shares are convertible into seven shares of \(10 par value ordinary shares and 3,000 shares are converted, what entry is required for the conversion, assuming the preference shares were issued at par value?
  3. If the preference shares were issued at \)107 per share, how should the preference shares be reported in the equity section?

The following is a summary of all relevant transactions of Vicario Corporation since it was organized in 2017. In 2017, 15,000 shares were authorized and 7,000 shares of common stock (\(50 par value) were issued at a price of \)57. In 2018, 1,000 shares were issued as a stock dividend when the stock was selling for \(60. Three hundred shares of common stock were bought in 2019 at a cost of \)64 per share. These 300 shares are still in the company treasury.

In 2018, 10,000 preferred shares were authorized and the company issued 5,000 of them (\(100 par value) at \)113. Some of the preferred stock was reacquired by the company and later reissued for \(4,700 more than it cost the company.

The corporation has earned a total of \)610,000 in net income after income taxes and paid out a total of $312,600 in cash dividends since incorporation.

Instructions

Prepare the stockholders鈥� equity section of the balance sheet in proper form for Vicario Corporation as of December 31, 2019. Account for treasury stock using the cost method.

P15-12 (LO1,2,3,4) (Analysis and Classification of Equity Transactions) Penn Company was formed on July 1, 2015. It was authorized to issue 300,000 shares of \(10 par value common stock and 100,000 shares of 8% \)25 par value, cumulative and nonparticipating preferred stock. Penn Company has a July 1鈥揓une 30 fiscal year.

The following information relates to the stockholders鈥� equity accounts of Penn Company.

Common Stock

Prior to the 2017鈥�2018 fiscal year, Penn Company had 110,000 shares of outstanding common stock issued as follows.

1. 85,000 shares were issued for cash on July 1, 2015, at \(31 per share.

2. On July 24, 2015, 5,000 shares were exchanged for a plot of land which cost the seller \)70,000 in 2009 and had an estimated fair value of \(220,000 on July 24, 2015.

3. 20,000 shares were issued on March 1, 2016, for \)42 per share.

During the 2017鈥�2018 fiscal year, the following transactions regarding common stock took place.

November 30, 2017 Penn purchased 2,000 shares of its own stock on the open market at \(39 per share. Penn uses the cost method for treasury stock.

December 15, 2017 Penn declared a 5% stock dividend for stockholders of record on January 15, 2018, to be issued on January 31, 2018. Penn was having a liquidity problem and could not afford a cash dividend at the time. Penn鈥檚 common stock was selling at \)52 per share on December 15, 2017.

June 20, 2018 Penn sold 500 shares of its own common stock that it had purchased on November 30, 2017, for \(21,000.

Preferred Stock

Penn issued 40,000 shares of preferred stock at \)44 per share on July 1, 2016.

Cash Dividends

Penn has followed a schedule of declaring cash dividends in December and June, with payment being made to stockholders of record in the following month. The cash dividends which have been declared since inception of the company through June 30, 2018, are shown below.

Declaration date

Common stock

Preferred stock

12/15/16

\(0.30 per share

\)1 per share

6/15/17

\(0.30 per share

\)1 per share

12/15/17

-

\(1 per share

No cash dividends were declared during June 2018 due to the company鈥檚 liquidity problems.

Retained Earnings

As of June 30, 2017, Penn鈥檚 retained earnings account had a balance of \)690,000. For the fiscal year ending June 30, 2018, Penn reported net income of $40,000.

Instructions

Prepare the stockholders鈥� equity section of the balance sheet, including appropriate notes, for Penn Company as of June 30, 2018, as it should appear in its annual report to the shareholders.
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