Question

Part A

In late 2015, the Nicklaus Corporation was formed. The corporate charter authorizes the issuance of 6,000,000 shares of common stock carrying a $1 par value, and 2,000,000 shares of $5 par value, noncumulative, nonparticipating preferred stock. On January 2, 2016, 4,000,000 shares of the common stock are issued in exchange for cash at an average price of $15 per share. Also on January 2, all 2,000,000 shares of preferred stock are issued at $20 per share.

Required:

1.

Prepare journal entries to record these transactions. (If no entry is required for a particular transaction, select "No journal entry required" in the first account field.)

Prepare the shareholders' equity section of the Nicklaus balance sheet as of March 31, 2016. (Assume net income for the first quarter 2016 was $2,000,000.)

Part B

During 2016, the Nicklaus Corporation participated in three treasury stock transactions:

a.	On June 30, 2016, the corporation reacquires 300,000 shares for the treasury at a price of $17 per share.
b.	On July 31, 2016, 75,000 treasury shares are reissued at $20 per share.
c.	On September 30, 2016, 75,000 treasury shares are reissued at $15 per share.

Required:

1.

Prepare journal entries to record these transactions. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

2.

Prepare the Nicklaus Corporation shareholders' equity section as it would appear in a balance sheet prepared at September 30, 2016. (Assume net income for the second and third quarter was $3,500,000.)

Part C

On October 1, 2016, Nicklaus Corporation receives permission to replace its $1 par value common stock (6,000,000 shares authorized, 4,000,000 shares issued, and 3,850,000 shares outstanding) with a new common stock issue having a $.50 par value. Since the new par value is one-half the amount of the old, this represents a 2-for-1 stock split. That is, the shareholders will receive two shares of the $.50 par stock in exchange for each share of the $1 par stock they own. The $1 par stock will be collected and destroyed by the issuing corporation.

    On November 1, 2016, the Nicklaus Corporation declares a $0.25 per share cash dividend on common stock and a $0.40 per share cash dividend on preferred stock. Payment is scheduled for December 1, 2016, to shareholders of record on November 15, 2016.

    On December 2, 2016, the Nicklaus Corporation declares a 2% stock dividend payable on December 28, 2016, to shareholders of record on December 14. At the date of declaration, the common stock was selling in the open market at $15 per share. The dividend will result in 154,000 (0.02 × 7,700,000) additional shares being issued to shareholders.

Required:

1.

Prepare journal entries to record the declaration and payment of these stock and cash dividends. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

2.

Prepare the December 31, 2016, shareholders' equity section of the balance sheet for the Nicklaus Corporation. (Assume net income for the fourth quarter was $3,000,000.)

3.	Prepare a statement of shareholders' equity for Nicklaus Corporation for 2016. (Amounts to be deducted should be indicated with a minus sign. Enter your answers in thousands.)

Answer 1

As per policy only part A will be answered completely

Journal entries

Event	general journal	debit	credit
1.	cash (4000000*15)	60000000
	Common Stock (4000000*1)		4000000
	Additional paid in capital - common stock (4000000*14)		56000000
	(issue of common stock)
2.	cash (2000000*20)	40000000
	Preferred stock (2000000*5)		10000000
	Additional paid in capital - preferred stock (2000000*15)		30000000
	(issue of preferred stock)

Requirement 2  shareholders' equity section

Nicklaus Corporation

Balance sheet - shareholders' equity section

December 31, 2016

Stockholders' equity
Preferred stock	10000000
Common Stock	4000000
Additional paid in capital - common stock	56000000
Additional paid in capital - preferred stock	30000000
Retained earnings	2000000
Total stockholders' equity	102000000