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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

(Dividends and Stockholders鈥� Equity Section) Anne Cleves Company reported the following amounts in the stockholders鈥� equity section of its December 31, 2016, balance sheet.

Preferred stock, 10%, \(100 par (10,000 shares authorized, 2,000 shares issued)

\)200,000

Common stock, \(5 par (100,000 shares authorized, 20,000 shares issued)

100,000

Additional paid-in capital

125,000

Retained earnings

450,000

Total

\)875,000

During 2017, Cleves took part in the following transactions concerning stockholders鈥� equity.

  1. Paid the annual 2016 \(10 per share dividend on preferred stock and a \)2 per share dividend on common stock. These dividends had been declared on December 31, 2016.
  2. Purchased 1,700 shares of its own outstanding common stock for \(40 per share. Cleves uses the cost method.
  3. Reissued 700 treasury shares for land valued at \)30,000.
  4. Issued 500 shares of preferred stock at \(105 per share.
  5. Declared a 10% stock dividend on the outstanding common stock when the stock is selling for \)45 per share.
  6. Issued the stock dividend.
  7. Declared the annual 2017 \(10 per share dividend on preferred stock and the \)2 per share dividend on common stock. These dividends are payable in 2018.

Instructions

  1. Prepare journal entries to record the transactions described above.
  2. Prepare the December 31, 2017, stockholders鈥� equity section. Assume 2017 net income was $330,000.

(Computation of Retained Earnings) The following information has been taken from the ledger accounts of Isaac Stern Corporation.

Total income since incorporation $317,000

Cash dividends paid 60,000

Total value of stock dividends distributed 30,000

Gains on treasury stock transactions 18,000

Unamortized discount on bonds payable 32,000

Instructions

Determine the current balance of retained earnings.

(Treasury Stock Transactions and Presentation) Clemson Company had the following stockholders鈥� equity as of January 1, 2017

Common stock, \(5 par value, 20,000 shares issued \)100,000

Paid-in capital in excess of par鈥攃ommon stock 300,000

Retained earnings 320,000

Total stockholders鈥� equity \(720,000

During 2017, the following transactions occurred.

Feb.1 Clemson repurchased 2,000 shares of treasury stock at a price of \)19

per share.

Mar.1 800 shares of treasury stock repurchased above were reissued at \(17

per share.

Mar.18 500 shares of treasury stock repurchased above were reissued at \)14

per share.

Apr. 22 600 shares of treasury stock repurchased above were reissued at \(20

per share.

Instructions

  1. Prepare the journal entries to record the treasury stock transactions in 2017, assuming Clemson uses the cost method.
  2. Prepare the stockholders鈥� equity section as of April 30, 2017. Net income for the first 4 months of 2017 was \)130,000.

(Stock Split and Stock Dividend) The common stock of Alexander Hamilton Inc. is currently selling at \(120 per share. The directors wish to reduce the share price and increase share volume prior to a new issue. The per share par value is \)10; book value is $70 per share. Nine million shares are issued and outstanding.

Instructions

Prepare the necessary journal entries assuming the following

  1. The board votes a 2-for-1 stock split.
  2. The board votes a 100% stock dividend.
  3. Briefly discuss the accounting and securities market differences between these two methods of increasing the number of shares outstanding.

(Equity Items on the Balance Sheet) The following are selected transactions that may affect stockholders鈥� equity.

  1. Recorded accrued interest earned on a note receivable.
  2. Declared a cash dividend.
  3. Declared and distributed a stock split.
  4. Approved a retained earnings restriction.
  5. Recorded the expiration of insurance coverage that was previously recorded as prepaid insurance.
  6. Paid the cash dividend declared in item 2 above.
  7. Recorded accrued interest expense on a note payable.
  8. Declared a stock dividend.
  9. Distributed the stock dividend declared in item 8.

Instructions

In the following table, indicate the effect each of the nine transactions has on the financial statement elements listed. Use the following code: I = Increase, D = Decrease, NE = No effect.

Item

Asset

Liabilities

Stockholders鈥� Equity

Paid-in Capital

Retained

Earnings

Net Income
See all solutions

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