Sandhill Corporation has outstanding 2,981,000 shares of common stock with a par value of $10 each....
Sandhill Corporation has outstanding 2,981,000 shares of common
stock with a par value of $10 each. The balance in its Retained
Earnings account at January 1, 2020, was $24,083,000, and it then
had Paid-in Capital in Excess of Par—Common Stock of $4,991,000.
During 2020, the company’s net income was $4,741,000. A cash
dividend of $0.60 a share was declared on May 5, 2020, and was paid
June 30, 2020, and a 6% stock dividend was declared on November 30,
2020, and distributed to stockholders of record at the close of
business on December 31, 2020. You have been asked to advise on the
proper accounting treatment of the stock dividend.
The existing stock of the company is quoted on a national stock
exchange. The market price of the stock has been as
follows.
| October 31, 2020 | $32 | |
| November 30, 2020 | $35 | |
| December 31, 2020 | $39 |
Prepare the stockholders’ equity section (including schedules of retained earnings and additional paid-in capital) of the balance sheet of Sandhill Corporation for the year 2020 on the basis of the foregoing information.
Homework Answers
| a) | |||
| Date | Account Titles and Explanation | Debit | Credit |
| May. 5, 2020 | Dividends (2,981,000 shares * $0.60 per share) | $1,788,600 | |
| Dividends Payable | $1,788,600 | ||
| (To record the declaration of cash dividends) | |||
| Jun. 30, 2020 | Dividends Payable | $1,788,600 | |
| Cash | $1,788,600 | ||
| (To record the payment of cash dividends) | |||
| b) | |||
| Date | Account Titles and Explanation | Debit | Credit |
| Nov. 30, 2020 | Stock Dividends (2,981,000 shares * 6/100 = 178,860 shares * $39) | $12,162,480 | |
| Common Stock Dividends Distributable | $6,975,540 | ||
| (To record the declaration of 6% stock dividends) | |||
| Dec. 31, 2020 | Common Stock Dividends Distributable | $6,975,540 | |
| Common Stock (178,860 * $10) | $1,788,600 | ||
| Paid-in Capital in Excess of Par Value ($39 - $10 = $29 * 178,860 shares) | $5,186,940 | ||
| (To record the distribution of 6% stock dividend) |
| c) Stockholders' Equity | |
| Sandhill Corporation | |
| Statement of Stockholders' Equity | |
| Common Stock - Issued and Outstanding Shares ($29,810,000 + $1,788,600) | $31,598,600 |
| Paid-in Capital in Excess of Par - Common Stock ($4,991,000 + $5,186,940) | $10,177,940 |
| Retained Earnings ($24,083,000 + $4,741,000 - $1,788,600 - $1,788,600) | $25,246,800 |
| Total Stockholders' Equity | $67,023,340 |
Add Answer to:
Sandhill Corporation has outstanding 2,981,000 shares of common
stock with a par value of $10 each....
Sandhill Corporation has outstanding 2,981,000 shares of common stock with a par value of $10 each....
Sandhill Corporation has outstanding 2,981,000 shares of common
stock with a par value of $10 each. The balance in its Retained
Earnings account at January 1, 2020, was $24,083,000, and it then
had Paid-in Capital in Excess of Par—Common Stock of $4,991,000.
During 2020, the company’s net income was $4,741,000. A cash
dividend of $0.60 a share was declared on May 5, 2020, and was paid
June 30, 2020, and a 6% stock dividend was declared on November 30,
2020,...
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stock with a par value of $10 each. The balance in its Retained
Earnings account at January 1, 2020, was $24,083,000, and it then
had Paid-in Capital in Excess of Par—Common Stock of $4,991,000.
During 2020, the company’s net income was $4,741,000. A cash
dividend of $0.60 a share was declared on May 5, 2020, and was paid
June 30, 2020, and a 6% stock dividend was declared on November 30,
2020,...
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