Question

The balance sheet of Consolidated Paper, Inc., included the following shareholders' equity accounts at December 31, 2020: 

During 2021, several events and transactions affected the retained earnings of Consolidated Paper 

Required:

 1. Prepare the appropriate entries for these events.

 a. On March 3, the board of directors declared a property dividend of 205,000 shares of Leasco International common stock that Consolidated Paper had purchased in January as an investment (book value: $604,000). The investment shares had a fair value of $3 per share and were distributed March 31 to shareholders of record March 15.

 b. On May 3, a 5 for 4 stock split was declared and distributed. The stock split was effected in the form of a 25% stock dividend. The market value of the $1 par common stock was $11 per share.

 c. On July 5, a 2% common stock dividend was declared and distributed. The market value of the common stock was $11 per share.

 d. On December 1, the board of directors declared the 9.0% cash dividend on the 81.000 preferred shares, payable on December 28 to shareholders of record December 20

 e. On December 1, the board of directors declared a cash dividend of $0.50 per share on its common shares, payable on December 28 to shareholders of record Decerpber 20.

 2. Prepare the shareholders' equity section of the balance sheet for Consolidated Paper, Inc. at December 31, 2021. Net income for the year was $710.000.

Answer 1

Consolidate Paper, Inc., Requirement 2 Journal Enteries Date Particulars Requirement a Debit in $ Credit in $ 11000 Mar-03 Investment in Leasco [(205,000 x $3) - $604,000] a/c Dr. To Investment in Leasco 11000 Balance sheet - Partial As at Dec 31 Preferred stock, 9.0%, 81,000 shares at $1 par Common stock, 398,350 shares at $1 par Paid-in capital-excess of par, preferred Paid-in capital-excess of par, Common Retained earnings Dr. 615000 Retained Earnings (205,000 x $3) a/c To Property Dividend Payable 81000 398350 1435000 2562500 7872335 12349185 -34100 12315085 615000 Mar-15 No Entry Treasury Stock ( 3100 common shares) Total Stockholders Equity Dr. 615000 Mar-31 Property Dividend Payable a/c To Investment in Leasco 615000 Requirement b 77500 May-03 Retained Earnings [(25% x 310,000) x $1) a/c Dr. 77500 To Common Stock This is a large "stock dividend" that should be recorded at par value and should be based on outstanding common stock. Requiremento Dr. 85250 Retained Earnings a/c To Common Stock (7,750 x $1) To Paid-in capital-excess of par, common [(310,000+ 77,500) x 2%] = (7,750 x $11) 7750 77500 Requirement d Dr. 7290 Dec-01 Retained Earnings a/c To Preferred Dividend Payable (9.0% x $81,000) 7290 Dec-20 No Entry Dr. Dec-28 Preferred Dividend Payable a/c To Cash Dr. 7290 7290 Requiremente Dr. 197625 Dec-01 Retained Earnings a/c To Dividend Payable, Common Stock [(310,000 + 77,500 + 7,750) $0.50] 197625 Dec-20 No Entry Dec-28 Dividend Payable, Common Stock a/c To Cash Dr. 197625 197625

Answer 2

1.

Transaction / Event	Date	Account Titles	Debit	Credit
			$	$
a.	March 3	Investment in Leasco International	11,000
		Gain on Investments		11,000
	Mar 3	Retained Earnings	615,000
		Property Dividends Payable		615,000
	March 31	Property Dividend Payable	615,000
		Investment in Leasco International		615,000
b.	May 3	Retained Earnings ( 310,000 x 25 % x $ 1)	77,500
		Common Stock		77,500
c.	July 5	Retained Earnings	85,250
		Common Stock		7,750
		Paid-in Capital in Excess of Par: Common Stock		77,500
d.	Dec 1	Retained Earnings	7,290
		Dividends Payable: Preferred Stock		7,290
	Dec 28	Dividends Payable: Preferred Stock	7,290
		Cash		7,290
e.	Dec 1	Retained Earnings	197,625
		Dividends Payable: Common Stock		197,625
	Dec 28	Dividends Payable: Common Stock	197,625
		Cash		197,625

2.

Consolidated Paper Inc. Balance Sheet ( Partial ) December 31, 2021
Shareholders Equity
Preferred Stock	$ 81,000
Common Stock	398,350
Paid-in Capital in Excess of Par: Preferred	1,435,000
Paid-in Capital in Excess of Par: Common	2,562,500
Retained Earnings	7,872,335
Treasury Stock, at cost	(34,100)
Total Shareholders Equity	$12,315,085

Answer 3