Question

On December 31, 2020, Cullumber Corporation had the following shareholders’ equity accounts: CULLUMBER CORPORATION Balance Sheet...

On December 31, 2020, Cullumber Corporation had the following shareholders’ equity accounts:

CULLUMBER CORPORATION
Balance Sheet (partial)
December 31, 2020
Shareholders’ equity
     Common shares (unlimited number of shares authorized, 86,000 issued) $1,156,000
     Retained earnings 560,000
Total shareholders’ equity $1,716,000


During the year, the following transactions occurred:

Jan. 15 Declared a $1 per share cash dividend to shareholders of record on January 31, payable February 15.
July 1 Announced a 3-for-2 stock split. The market price per share on the date of the announcement was $12.
Dec. 15 Declared a 10% stock dividend to shareholders of record on December 30, distributable on January 15. On December 15, the market price of each share was $8; on December 30, $11; and on January 15, $10.
31 Determined that profit before income tax for the year was $462,000. The company has a 35% income tax rate.

Journalize the transactions and closing entries for 2021. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Record journal entries in the order presented in the problem.)

Date

Account Titles and Explanation

Debit

Credit
(To record declaration of cash dividend.)
(To record payment of dividend.)

July 1

Memo: 3-for-2 stock split increases the number of shares to
(To record declaration of
stock dividend.)
(To close Income Summary.)
(To close dividends to
retained earnings.)
Business   Accounting   
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Answer #1
Date Account titles and explanation Debit Credit
Jan 15. Dividends (86000*1) 86000
Dividend payable 86000
(To record declaration of cash dividend)
Jan 31. No entry
Feb 15. Dividend payable 86000
Cash 86000
(To record payment of cash dividend)
July 1. Memo:3-for-2 stock split increases the number of
shares to 129000 (86000*3/2).
Dec 15. Stock dividend (129000*10%*8) 103200
Stock dividend distributable 103200
(Consider market price on the date of declaration)
(To record declaration of stock dividend)
Dec 30. No entry
Dec 31. Retained earnings 189200
Dividends 86000
Stock dividend 103200
(To close dividends to retained earnings)
Dec 31. Income summary 462000*(100-35)% 300300
Retained earnings 300300
(To close Income Summary)
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