PROBLEM 4 13 points On January 1 2017 Smart Corp had Common

PROBLEM 4 (13 points): On January 1, 2017, Smart Corp had Common Stock ($12 par value, 120,000 shares issued and utstanding) worth $1,440,000: Paid-in Capital in Excess of Par-Common Stock $250,000, and Retained Earnings $380.000. uring the year, the following transactions occurred. Declared a $2 cash dividend per share to stockholders of record on January 31, payable February 12 Jan. 15 Feb. 12 Apr. 14 May 15 July 5 Dec. 1 Dec. 31 Paid the dividend declared in January. Declared a 12% stock dividend to stockholders of record on April 30, distributable May 15, On April 15, the market price of the stock was $14 per share. Issued the shares for the stock dividend. Announced a 3-for-1 stock split. The market price per share prior to the announcement was $18, Declared a $0.60 per share cash dividend to stockholders of record on December 15, payable Jan. 10, 2018. Determined that net income for the year was $210,000. tructions: Journalize the transactions and closing entries for net income and dividends. Note: Write clearly and use mplete account names [Do not abbreviate]. General Journal J 1 Account Titles and Explanation Ref.Debit Credit Date

Solution

Solution:

Date

Account Titles and Explanation

Debit

Credit

Jan.15

Retained Earnings (120,000 Shares *$2)

$240,000

Cash Dividend Payable

$240,000

(To record declaration of Cash dividend $2 each share)

Jan.31

No Entry is required on Record Date

Feb.12

Cash Dividend Payable

$240,000

Cash

$240,000

( To record cash dividend paid declared on Jan.15)

April.14

Retained Earnings

$201,600

Stock Dividend Distributable

$201,600

(to record declaration of stock dividend 12%)

(Number of Outstanding Shares before stock dividend 120,000 Shares x 12% * Market Price $14)

(Number of Outstanding Shares after stock dividend = 120,000 + 14,400 = 134,400 Shares)

April.30

No Entry is required on Record Date

May.15

Stock Dividend Distributable

$201,600

Common Stock (Number of Shares distributed 14,400 Shares * Par Value $12)

$172,800

Paid in Capital in Excess of Par - Common Stock (Bal fig)

$28,800

July.5

Memorandum: A 3 for 1 stock split increase the number of shares of common stock outstanding from 134,400 Shares to 403,200 Shares and reduced the par value from $12 to $4 per share ($12 par value / 3 stock for 1). The new 268,800 Shares were distributed

Dec.1

Retained Earnings (403,200 Shares *$0.60)

$241,920

Cash Dividend Payable

$241,920

(To record declaration of Cash dividend $0.60 each share)

Dec.15

No Entry is required on Record Date

Dec.31

Income Summary Statement

$210,000

Retained Earnigns

$210,000

(To record closing entry of Income transferred from Income Summary to Retained Earnings)

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Date	Account Titles and Explanation	Debit	Credit
Jan.15	Retained Earnings (120,000 Shares *$2)	$240,000
	Cash Dividend Payable		$240,000
	(To record declaration of Cash dividend $2 each share)
Jan.31	No Entry is required on Record Date
Feb.12	Cash Dividend Payable	$240,000
	Cash		$240,000
	( To record cash dividend paid declared on Jan.15)
April.14	Retained Earnings	$201,600
	Stock Dividend Distributable		$201,600
	(to record declaration of stock dividend 12%)
	(Number of Outstanding Shares before stock dividend 120,000 Shares x 12% * Market Price $14)
	(Number of Outstanding Shares after stock dividend = 120,000 + 14,400 = 134,400 Shares)
April.30	No Entry is required on Record Date
May.15	Stock Dividend Distributable	$201,600
	Common Stock (Number of Shares distributed 14,400 Shares * Par Value $12)		$172,800
	Paid in Capital in Excess of Par - Common Stock (Bal fig)		$28,800
July.5	Memorandum: A 3 for 1 stock split increase the number of shares of common stock outstanding from 134,400 Shares to 403,200 Shares and reduced the par value from $12 to $4 per share ($12 par value / 3 stock for 1). The new 268,800 Shares were distributed
Dec.1	Retained Earnings (403,200 Shares *$0.60)	$241,920
	Cash Dividend Payable		$241,920
	(To record declaration of Cash dividend $0.60 each share)
Dec.15	No Entry is required on Record Date
Dec.31	Income Summary Statement	$210,000
	Retained Earnigns		$210,000
	(To record closing entry of Income transferred from Income Summary to Retained Earnings)