Brief Exercise 15-13

 Account Title and Explanation Debit Credit Declaration Date Retained Earning Common Stock Dividend Distributed Paid-in Capital in Excess of Par-Common Stock \$1,469,345 \$206,950 \$1,262,395 Distribution Date Common Stock Dividend Distributed Common Stock \$206,950 \$206,950

Green Day Corporation has outstanding 413,900 shares of \$10 par value common stock. The corporation declares a 5% stock dividend when the fair value of the stock is \$72 per share.
Prepare the journal entries for Green Day Corporation for both the date of declaration and the date of distribution

Brief Exercise 15-2

Swarten Corporation issued 730 shares of no-par common stock for \$11,740.
Prepare Swarten’s journal entry if (a) the stock has no stated value, and (b) the stock has a stated value of \$3 per share.

 No. Account Title and Explanation Debit Credit a. Cash Common Stock \$11,740 \$11,740

 No. Account Title and Explanation Debit Credit b. Cash Common Stock (730×\$3) Additional Paid-in Capital \$11,740 \$2,190 \$9,550

Exercise 15-21

The outstanding capital stock of Edna Millay Corporation consists of 2,000 shares of \$102 par value, 6% preferred, and 6,000 shares of \$52 par value common.

Assuming that the company has retained earnings of \$110,000, all of which is to be paid out in dividends, and that preferred dividends were not paid during the 2 years preceding the current year, state how much each class of stock should receive under each of the following conditions.

(a) The preferred stock is noncumulative and nonparticipating.

Preferred dividend = 2,000 shares ×\$102 par value × 6% dividend = \$12,240

Total Remaining Payout = \$110,000 -\$12,240 = \$98,760

Preferred dividend = \$12,240

Common dividend = \$98,760

(b) The preferred stock is cumulative and nonparticipating.

Preferred dividend, 2 prior years =2, 000 shares ×\$102 par value × 6% dividend ×2 = \$24,480

Preferred dividend, this year = 2000 shares × \$102 par value × 6% dividend = \$12,240

Remaining Payout = \$110,000-\$24,480 -\$12,240 = \$73,280

Preferred dividend =\$36,720

Common dividend =\$73,280

(c) The preferred stock is cumulative and participating.

Preferred dividend, 2 prior years =2, 000 shares ×\$102 par value × 6% dividend ×2 = \$24,480

Preferred dividend, this year = 2000 shares × \$102 par value × 6% dividend = \$12,240

Common dividend = 6,000 shares ×\$52 par value × 6% =\$18,720

Remaining payout = \$110,000 – \$24,480 -\$12,240 – \$18,720 =\$55,560

Par value of stock to participate:

Preferred = 2,000 shares ×\$102 = \$204,000

Common = 6,000 shares ×\$52 = \$312,000

Participating payout

Preferred =\$55,560 × (\$204,000÷\$516,000) = \$21,966

Common = \$55,560 × (\$312,000÷\$516,000) = \$33,594

Total preferred dividend = \$58,686

Total common dividend = \$52,314

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