Answered Essay: The following condensed balance sheet information has been prepared by the controller of

The following condensed balance sheet information has been prepared by the controller of

N2N2 Company
Balance Sheet
December 31, 2016
Assets
Current assets $ 40,000
Investments in equity securities (10,000 shares)     60,000
Equipment, net 250,000
Intangibles     60,000
     Total Assets 410,000
Liabilities and Equity
Current liabilities     75,000
Non-current liabilities     25,000
Common stock ($5 par)     20,000
Paid in capital in excess of par 110,000
Retained earnings 180,000
     Total Liabilities and Equity 410,000

Using the attached T-account template, prepare the entries to recognize the following transactions.

Declares and pays a $ 0.50 per share cash dividend

Declares and issues a 10% stock dividend when the market price of the stock is $14 per share

Declares and issues a 30% stock dividend when the market price of the stock is $15 per share

Declares and issues a property dividend as follows. N2N2 gives one share of its investment in equity securities for every 2 shares that a N2N2 investor holds of N2N2 common stock. The equity investment shares are selling for $10 per share, in an active market, on the date the property dividend is declared by the board of directors.

Declares a 2 for 1 stock split and issues new shares to the stockholders

Expert Answer

 

Entries to recognize the following transactions are as shown below:

Date Particulars L.F Amount ($) Amount ($)
1 Dividend Expense 2,000
Dividend payable 2,000
(For dividend declared)
(20,000/5 = 4,000 shares = 4,000*.5 = 2,000)
Dividend payable 2,000
Cash 2,000
(for dividend paid)
2 Retained Earnings (4,000*10%*14) 5,600
Common Stock Dividend distributable (4,000*10%*5) 2,000
Additional paid in capital (400*14 )- 2,000 3,600
(for 10% stock declared)
Common Stock Dividend Distributable 2,000
Common Stock 2,000
(For stock issued)
3 Retained Earnings (4,000*30%*5) 6,000
Common Stock Dividend distributable (4,000*30%*5) 6,000
(for 30% stock declared)
Common Stock Dividend Distributable 6,000
Common Stock 6,000
(For stock issued)
4 Equity Investments (10-6)*2,000 8,000
Unrealized holding gain or loss- Income 8,000
(For increase in value of securities to be issued recorded)
Retained Earnings (2,000*10) 20,000
Equity Investments 20,000
(For distribution of property dividend recorded)
5 No journal entry required. Only in Note mentioned that stock is split by 2 for 1
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