Question

The stockholders’ equity section of the balance sheet of Pittman Corporation as of December 31, 20X4, was as follows:
Contributed Capital
Common stock, $4 par value, 500,000 shares authorized,
200,000 shares issued and outstanding
$800,000
Paid-in Capital in Excess of Par Value, Common
$1,000,000
Total Contributed Capital
$1,800,000
Retained Earnings
$1,200,000
Total Stockholders' Equity
$3,000,000
The following transactions occurred in 20X5 for Pittman Corporation:
Feb. 28 The board of directors declared and issued a 10 percent stock dividend. The market value on this date is $16.
Aug. 3 Declared a 2-for-1 stock split.
Dec. 31 Declared and distributed a 5 percent stock dividend to stockholders. The market value per share was $9.
Assume net income for 20X5 is $108,000.
1. Record the transactions for Pittman Corporation in journal entry format.
2. Post the entries to T accounts.
3. Prepare the stockholders’ equity section of the company’s balance sheet as of December 31, 20X5.

Answer 1

1) Journal entries:
Date	Acc Title	Debit $	Credit $
Feb 28, 20X5	Stock Dividend	320000
	Common Stock		80000	20000*4
	Paid in capital in excess of par value, CS		240000
	(stock dividend issued : 200000*10%*16)
3-Aug	NO ENTRY
31-Dec	Stock Dividend	198000
	Common Stock		44000	22000*2
	Paid in capital in excess of par value, CS		154000
	(stock dividend issued :440000*5%*9)
31-Dec	Retained Earnings	518000
	Stock Dividend		518000
	(being stock dividend transferred to RE)
31-Dec	Income Summary	108000
	Retained Earnings		108000
	(being net income transferred to RE)

2) T-Accounts:
DEBIT	AMOUNT $	CREDIT	AMOUNT $
Common Stock
cb	924000	ob	800000
		28-Feb	80000
		31-Dec	44000
Paid in Capital in Excess of par value-CS
cb	1394000	ob	1000000
		28-Feb	240000
		31-Dec	154000
Retained Earnings
31-Dec	518000	ob	1200000
cb	790000	31-Dec	108000

3) The Stockholders' equity section of the balance
sheet as on Dec 31, 20X5:
Contributed Capital	AMOUNT $
Common stock, $2 par value, 1000,000 shares authorized,
462,000 shares issued and outstanding	924000
Paid-in Capital in Excess of Par Value, Common	1394000
Total Contributed Capital	2318000
Retained Earnings	790000
Total Stockholders' Equity	3108000