Question

Identifying and Analyzing Financial Statement Effects of Dividends The stockholders’ equity of Palepu Company at December...

Identifying and Analyzing Financial Statement Effects of Dividends

The stockholders’ equity of Palepu Company at December 31, 2015, appears below.

During 2016, the following transactions occurred:

Required

a. Using the financial statement effects template, illustrate the effects of these transactions.

b. Prepare the journal entries for these transactions.

c. Post the journal entries from b to the related T-accounts.

d. Prepare a retained earnings reconciliation for 2016 assuming that the company reports 2016 net income of $283,000. Hint: Do not use negative signs with answers below.

Common stock, $12 par value, 200,000 shares authorized;
80,000 shares issued and outstanding $960,000
Paid-in capital in excess of par value 485,000
Retained earnings 310,000
May 12 Declared and issued a 6% stock dividend; the common stock market value was $18 per share.
Dec. 31 Declared and paid a cash dividend of 75 cents per share.
Balance Sheet
Transaction Cash Asset + Noncash Assets = Liabilities + Contrib. Capital + Earned Capital
5/12 Declared and paid stock dividend $Answer + $Answer = $Answer + $57,600 + $Answer
Answer + Answer = Answer + Answer + Answer
12/31 Declared and issued cash dividend Answer + Answer = Answer + Answer + Answer
Income Statement

Revenues
-
Expenses
=
Net Income
$Answer - $Answer = $Answer
Answer - Answer = Answer
Answer - Answer = Answer
General Journal
Date Description Debit Credit
5/12 Answer
Answer Answer
Common Stock Answer Answer
Answer
Answer Answer
12/31 Answer
Answer Answer
Answer
Answer Answer
Cash (A)
5/12 Answer Answer
12/31 Answer Answer
Common Stock (SE)
5/12 Answer Answer
12/31 Answer Answer
Retained Earnings (SE)
5/12 Answer Answer
12/31 Answer Answer
Additional Paid-in Capital (SE)
5/12 Answer Answer
12/31 Answer Answer
PALEPU COMPANY
Statement of Retained Earnings
For the Year Ended December 31, 2016
Retained earnings, December 31, 2015 $Answer
Add:
Answer
Answer
Answer
Less:
Cash dividends declared $Answer
Answer
Answer Answer
Retained earnings, December 31, 2016 $Answer
Business   Accounting   
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Homework Answers

Answer #1

first all record all the opening balances in the respective accounts as per the given data in the question.

Common Stock & paid in capital in excess of par value will always have credit balance, hence it will be record on the credit side.

Retained earnings can have a negative balance, but that will be indicated in brackets, since in the question, a positive retained earnings balance is given, we will record it on the credit side.

05th May Transaction: As per the journal entry Retained earnings got debited by two accounts - common stock & paid in capital in excess of par value.

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