Acct.

387(FALL2002)
EquityTransactionExamplesSolutions
Page1of3

CashDividends:OnDec.1,1997,Ripdeclaresa$2.00pershare
cashdividendon10,000sharesofcommonstock.PayableonFeb.
1,1998toholdersofrecordonDec.31,1997.

Required:Prepareallnecessaryentriestorecordthedeclaration
andpaymentoftheabovedividend.

12/1/97 Retained earnings 20,000

Dividends payable 20,000

2/1/98 Dividends payable 20,000

Cash 20,000

Propertyand"SpinOff"Dividends:OnJune30.1997,JonesCorp.
declaresapropertydividendoffoursharesofXYZCorp.stock
(bookvalueofXYZshares$20pershareandcurrentmarketvalue
$25pershare)oneachofJones25,000sharesofcommonstock.
PayableAug.15,1997(note:marketvalueonAug.15,1997is$23
pershare)toholdersofrecordonJuly20,1997.

Required:Prepareallnecessaryentriestorecordthedeclaration
andpaymentoftheabovedividendassuming:(A)Assumingthisisa
normalpropertydividend,and(B)Assumingthisisa"spinoff"
typedividend.

(A) 6/30/97
Retained earnings 2,500,000
Property dividends payable 2,500,000

(A) 6/30/97
Investments 500,000
Gain on Disposal Investment 500,000

(A) 8/15/97
Property dividends payable2,500,000
Investments 2,500,000
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(B) 6/30/97
Retained earnings 2,000,000
Property dividends payable 2,000,000

(B) 8/15/97
Property dividends payable2,000,000
Investments 2,000,000
 EquityTransactionExamples
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LiquidatingandnormalCashDividends:OnDec.1,1997,Rip
declaresa$50persharecashdividend(80%wasaliquidating
dividend)on10,000sharesofcommonstock.PayableonFeb.1,
1998toholdersofrecordonDec.31,1997.

Required:Prepareallnecessaryentriestorecordthedeclaration
andpaymentoftheabovedividend.

12/1/97 Retained earnings 100,000

Contributed capital in
excess or par 400,000
Dividends payable 500,000

2/1/98 Dividends payable 500,000

Cash 500,000

ScripandnormalCashDividends:OnDec.1,1997,Ripdeclaresa
$20persharedividend(1/4payableincashthebalanceinscrip)
on10,000sharesofcommonstock.DistributableonFeb.1,1998
toholdersofrecordonDec.31,1997.Thescripdividendaccrues
interestat6%andwillbepaidSept.1,1998.

Required:Prepareallnecessaryentriestorecordthedeclaration
andpaymentoftheabovedividends.

12/1/97 Retained earnings 200,000

Dividends payable 50,000
Scrip dividends payable 150,000

2/1/98 Dividends payable 50,000

Cash 50,000

9/1/98 Scrip dividends payable 150,000

Interest expense 5,250
Cash 155,250
 EquityTransactionExamples
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SmallStockDividends:OnDec.1,1997,Ripdeclaresa10%stock
dividendon15,000sharesof$1parcommonstock,thestockis
sellingfor$10pershare.PayableonFeb.1,1998toholdersof
recordonDec.31,1997.OnFeb.1,1998,1,500shareswere
distributedtotheholdersofthe15,000sharesofstock.

Required:Prepareallnecessaryentriestorecordthedeclaration
andpaymentoftheabovedividend.

12/1/97 Retained earnings 15,000

Common stock div. dist. 1,500
Paid-in excess of par 13,500

2/1/98 Common stock div. dist. 1,500

Common stock 1,500

LargeStockDividendsandStockSplits:OnDec.1,1997,Rip
declaresa100%stockdividendon15,000sharesof$1parcommon
stock,thestockissellingfor$10pershare.PayableonFeb.1,
1998toholdersofrecordonDec.31,1997.

Required:Prepareallnecessaryentriestorecordthedeclaration
andpaymentoftheabovedividend.

12/1/97 Retained earnings 15,000

Common stock div. dist. 15,000

2/1/98 Common stock div. dist. 15,000

Common stock 15,000

OnDec.1,1997,Ripdeclaresa2for1stockspliton15,000
sharesof$1parcommonstock.PayableonFeb.1,1998toholders
ofrecordonDec.31,1997.

Required:Prepareallnecessaryentriestorecordtheabovestock
split.

12/1/97 Memorandum entry

2/1/98 Common stock $1 par 15,000

Common stock $.50 par 15,000