Stock Dividends
1. Antique Buggy Corporation has 500,000 shares of $20 par common stock outstanding. On
June 8, Antique Buggy Corporation declared a 2% stock dividend to be issued August 12 to
stockholders of record on July 13. The market price of the stock was $25 per share on June 8.
Journalize the entries required on June 8, July 13, and August 12.
Journal
Date
June 8
July 13
Aug 12
Details
Stock dividends (10,000 shares X $25)
Stock dividends distributable (41,000 shares X $20)
Paid in capital in excess of par - common (41,000
shares X $5) $25-$20
Stock dividends declared
No entry
Stock dividends distributable (41,000 shares X $35)
Common stock
Stock dividends distributed
Dr $
250,000
Cr $
200,000
50,000
200,000
200,000
Treasury Stock
2. Lawn Spray Inc. develops and produces spraying equipment for lawn maintenance and
industrial uses. On January 31 of the current year, Lawn Spray Inc. reacquired 50,000 shares of
its common stock at $51 per share. On June 14, 24,000 of the reacquired shares were sold at $60
per share, and on November 23, 18,000 of the reacquired shares were sold at $56.
a. Journalize the transactions of January 31, June 14, and November 23.
Journal
Date
Details
Dr $
Cr $
b. What is the balance in Paid-In Capital from Sale of Treasury Stock on December 31 of the
current year?
Paid in capital from sale of treasury stock
c. What is the balance in Treasury Stock on December 31 of the current year?
Treasury Stock
a. Journalize the transactions of January 31, June 14, and November 23.
Explanation:
deb cre
jan-31 Treasury Stock 2550000
(50000*51)
Cash
jun-14 Cash
2,550,000
1440000
(24000*60)
Treasury Stock
1,224,000
(24000*51)
Paid in capital for treasury stock
nov-23 Cash
216,000
1,008,000 (18000*56)
Treasury stock
918000
(18000*51)
Paid in capital for treasury stock
credit
90000
Date
May 14
Sep 6
Nov 30
Details
Treasury stock (contra equity) (23,500 shares
X$75)
Cash
Reacquired shares of common stock
Cash (14,000 shares X $81)
Treasury stock (14,000 shares X $21)
Paid in capital from sale treasury stock
(14,000 shares X $6) $81- $75)
Sold treasury stock above its cost price
Dr $
1,762,500
Cash (9,500 shares X $72)
Paid in capital from sale of treasury stock
(30,000 shares X $2)
Treasury stock (9,500 shares x $3) $75 - $72
Sold treasury stock below its cost price
684,000
28,500
Cr $
1,762,500
1,134,000
1,050,000
84,000
712,500
3. Biscayne Bay Water Inc. bottles and distributes spring water. On May 14 of the current year,
Biscayne Bay Water Inc. reacquired 23,500 shares of its common stock at $75 per share. On
September 6, Biscayne Bay Water Inc. sold 14,000 of the reacquired shares at $81 per share. The
remaining 9,500 shares were sold at $72 per share on November 30.
a. Journalize the transactions of May 14, September 6, and November 30.
Journal
Date
May 14
Sep 6
Nov 30
Details
Treasury stock (contra equity) (23,500 shares
X$75)
Cash
Reacquired shares of common stock
Cash (14,000 shares X $81)
Treasury stock (14,000 shares X $21)
Paid in capital from sale treasury stock
(14,000 shares X $6) $81- $75)
Sold treasury stock above its cost price
Dr $
1,762,500
Cash (9,500 shares X $72)
Paid in capital from sale of treasury stock
(30,000 shares X $2)
Treasury stock (9,500 shares x $3) $75 - $72
Sold treasury stock below its cost price
684,000
28,500
Cr $
1,762,500
1,134,000
1,050,000
84,000
712,500
b. What is the balance in Paid-In Capital from Sale of Treasury Stock on December 31 of the
current year?
$55,500 ($84,000 – $28,500) credit
Paid in capital from sale of treasury stock
28,5000
8 4,0000
55,000
c. Where will the balance in Paid-In Capital from Sale of Treasury Stock be reported on the
balance sheet?
Stockholders’ equity section
d. For what reasons might Biscayne Bay Water Inc. have purchased the treasury stock?
Biscayne Bay Water Inc. may have purchased the stock to support the market price
of the stock, to provide shares for resale to employees, or for reissuance to employees as a
bonus according to stock purchase agreements
Statement of Retained Earnings
4. Rockwell Inc. reported the following results for the year ended June 30, 2015: Retained
earnings, July 1, 2014 is $3,900,000; Net income is $714,000; Cash dividends declared
$100,000; Stock dividends declared is $50,000. Prepare a retained earnings statement for the
fiscal year ended June 30, 2015.
Retained Earnings Final Balance = Retained Earnings Beginning balance – Dividend in cash –
Stock dividend + Net Income – Net loss.
Rockwell Inc.
RETAINED EARNINGS STATEMENT FOR THE FISCAL YEAR ENDED JUNE 30, 2015
Retained Earnings, June 30, 2014
Cash Dividends
Stock Dividends
Net Income, June 30, 2014
3,900,000
(100,000)
(50,000)
714,000
RETAINED EARNINGS, June 30, 2015
4,464,000