Session 17

Session 17
P14-1A & 14-2A

P14-1A On January 1, 2017, Geffrey Corporation had
the following stockholders’ equity accounts.
Common Stock ($20 par value, 60,000 shares

issued and outstanding) $1,200,000
Paid-in Capital in Excess of Par—Common Stock 200,000
Retained Earnings 600,000

During the year, the following transactions occurred.
a) Journalize the transactions and the closing entries for net
income and dividends.
Feb 1 Declared a $1 cash dividend per share to stockholders
of record on February 15, payable March 1.
Cash Dividends 60,000*

Dividends Payable 60,000
*(60,000 X $1)
Mar 1 Paid the dividend declared in February.

Cash 60,000
April 1 Announced a 2-for-1 stock split. Prior to the
split, the market price per share was $36.
Memo—two-for-one stock split

increases number of shares to
120,000* and reduces par value to
$10 per share.
*(60,000 X 2)
July 1 Declared a 10% stock dividend to stockholders of
record on July 15, distributable July 31. On July 1, the market
price of the stock was $13 per share.
Stock Dividends 156,000*

CS Dividends Distributable 120,000**
PIC: Common Stock 36,000***
*(120,000X10% X $13)
**(12,000 X $10)
***(12,000 X $3)
July 30 Issued the shares for the stock dividend.
C S Dividends Distributable 120,000

Common Stock 120,000
Dec 1 Declared a $0.50 per share dividend to stockholders
of record on December 15, payable January 5, 2018.

*(132,000 X $.50)
(60,000X2)+12,000
Dec 31 Determined that net income for the year was
$350,000.
Income Summary 350,000


Stock Dividends 156,000

Cash Dividends 126,000
b)Enter the beginning balances, and post the entries
to the stockholders’ equity accounts.
Common Stock
Date Debit Credit
Jan. 1 1,200,000
Apr. 1
July 31 120,000
1,320,000
Common Stock Dividends Distributable

Date Debit Credit
July 1 120,000
31 120,000 0
Paid-in Capital in Excess of Par—Common Stock

Date Debit Credit
Jan. 1 200,000
July 1 36,000
236,000
Retained Earnings
Date Debit Credit
Jan. 1 600,000
Dec. 31 350,000
156,000
126,000 _______
668,000
Cash Dividends
Date Debit Credit
Feb. 1 60,000
Dec. 1 66,000
Dec. 31 _______ 126,000
0
Stock Dividends
Date Debit Credit
July 1 156,000
Dec. 31 _______ 156,000
0
c) Prepare a stockholders’ equity section at
December 31
GEFFREY CORPORATION
Balance Sheet (Partial)
December 31, 2017
Stockholders’ equity
Capital stock
Common stock, $10 par value, 132,000
shares issued and outstanding ............... $1,320,000
Additional paid-in capital
In excess of par—common stock ............ 236,000
Total paid-in capital ................... 1,556,000
.................................... 668,000
Total stockholders’ equity $2,224,000
P14-2A The stockholders equity accounts of Karp Company
at January 1, 2017, are as follows:
Preferred Stock, 6%, $5O par: $600,000
Common Stock, $5 par: 800,000
Paid-in Capital in Excess of Par-Preferred Stock: 200,000
Paid-in Capital in Excess of Par-Common Stock: 300,000
Retained Earnings: 800,000

During 2017, the company had the following transactions
and events:
a) Journalize the transactions, events, and closing entries for
net income and dividends.
July 1 Declared a $0.6 cash dividend per share
on common stock

*[($800,000 ÷ $5) X $.60]

Aug. 1 Discovered $25,000 understatement of
depreciation expense in 2016.
Depreciation Expense 25,000

Accumulated Depreciation 25,000

Accumulated Depreciation 25,000
Sept. 1 Paid the cash dividend declared on July 1

Cash 96,000
Dec. 1 Declared a 15% stock dividend on common stock
when the market price of the stock was S 18 per share.
Stock Dividends 432,000*

CS Dividends Distributable 120,000**
PIC: Common Stock 312,000***
*(160,000X15%X $18)
**(24,000 X $5)
***(24,000 X $13)
Dec. 15 Declared a 6% cash dividend on preferred
stock payable January 15, 2018.

*[12,000 X ($50 X 6%)]
$600,000 $50
Dec. 31 Determined that net income for the year
was $355,000
Income Summary 355,000


Cash Dividends 132,000

Stock Dividends 432,000
b)Enter the beginning balances, and post the entries to
the stockholders’ equity accounts.
Preferred Stock
Date Debit Credit
Jan. 1 600,000
Common Stock
Date Debit Credit
Jan. 1 800,000
Common Stock Dividends Distributable

Date Debit Credit
Dec. 1 120,000
Paid-in Capital in Excess of Par—Preferred Stock

Date Debit Credit
Jan. 1 200,000
Paid-in Capital in Excess of Par—Common Stock

Date Debit Credit
Jan. 1 300,000
Dec. 1 312,000
612,000
Retained Earnings
Date Debit Credit
Jan. 1 800,000
Aug. 1 25,000
Dec. 31 132,000
31 432,000
31 _______ 355,000
566,000
Cash Dividends
Date Debit Credit
July 1 96,000
Dec. 15 36,000
31 132,000
0
Stock Dividends
Date Debit Credit
Dec. 1 432,000
31 _______ 432,000
0
c) Prepare a retained earnings statement for the year
KARP COMPANY
Retained Earnings Statement
For the Year Ended December 31, 2017
Balance, January 1, as reported ........................... $ 800,000

Correction of 2016 depreciation expense (25,000)
Balance, January 1, as adjusted 775,000
Add: Net income .................................................. 355,000
1,130,000
Less: Cash dividends—preferred .......... $ 36,000
Stock dividends—common................ 432,000
Cash dividends—common................ 96,000 564,000
Balance, December 31 ........................................... $ 566,000
d) Prepare a stockholders’ equity section at December
31
KARP COMPANY
Balance Sheet (Partial)
December 31, 2017
Stockholders’ equity
Paid-in capital
Capital stock
6% Preferred stock, $50 par
value, 12,000 shares issued ............ $ 600,000
Common stock, $5 par value,
160,000 shares issued $800,000
Common stock dividends distributable
(24,000 shares) ......................................... 120,000 920,000
Total capital stock ...................... 1,520,000
Additional paid-in capital
In excess of par—
preferred stock …………………….. 200,000
In excess of par—
common stock ..................................... 612,000
Total additional paid-in capital ........ 812,000
Total paid-in capital ............. 2,332,000
Retained earnings (see Note B) ............... 566,000
Total stockholders’
equity ................................ $2,898,000
Note B: Retained earnings is restricted for plant expansion,
$200,000.

Session 17

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Session 17

P14-1A & 14-2A

Common Stock ($20 par value, 60,000 shares

Paid-in Capital in Excess of Par—Common Stock 200,000

Retained Earnings 600,000

Cash Dividends 60,000*

Dividends Payable 60,000

Memo—two-for-one stock split

Stock Dividends 156,000*

C S Dividends Distributable 120,000

Cash Dividends 66,000*

Income Summary 350,000

Retained Earnings 156,000

Retained Earnings 126,000

Common Stock Dividends Distributable

Paid-in Capital in Excess of Par—Common Stock

Preferred Stock, 6%, $5O par: $600,000

Common Stock, $5 par: 800,000

Paid-in Capital in Excess of Par-Preferred Stock: 200,000

Paid-in Capital in Excess of Par-Common Stock: 300,000

Retained Earnings: 800,000

Cash Dividends 96,000*

*[($800,000 ÷ $5) X $.60]

Depreciation Expense 25,000

Retained Earnings 25,000

Dividends Payable 96,000

Stock Dividends 432,000*

Cash Dividends 36,000*

*[12,000 X ($50 X 6%)]

Income Summary 355,000

Retained Earnings 132,000

Retained Earnings 432,000

Common Stock Dividends Distributable

Paid-in Capital in Excess of Par—Preferred Stock

Paid-in Capital in Excess of Par—Common Stock

Balance, January 1, as reported ........................... $ 800,000

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