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Selected transactions completed by Romney Circus Supplies Corporation during the current fiscal year are as follows: Jan. 6.
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Answer #1
Date Description Amount (Dr) Amount (Cr)
While account balances do not change after a stock split, there is one change that should be noted: the par value per share decreases with a stock split. Even though there are more shares of stock, the total par value is unchanged.
Jan 6 Common Stock after split - 225000 outstanding @ Par value $40
Common stock before split - (225000/3) = 75000 @ $120 Par Value
(Being Common Stock Split 3 for 1 )
Mar 13 The financial effects of a company retiring its own common stock, are a decrease in resources (assets) and an equal decrease in sources of resources (stockholders' equity). Assets and stockholders' equity both decrease by the dollar amount the company pays to acquire the stock
Treasury stock When a company acquires some of its own stock and holds it rather than retiring it, such shares are called treasury stock. The shares continue to be authorized shares and may be used by the company again at a later date but they are not currently in the hands of owners. Although the treasury shares were authorized (in the articles of incorporation) and had been issued to owners, they are not outstanding because they are not being held by owners
Thus, when a company has treasury stock, its issued shares differ from its outstanding shares. Since treasury stock shares are not in the hands of owners, such shares are not eligible to vote on any stockholders' issues, nor are such shares eligible to receive cash dividends. Many companies use treasury stock for employee stock purchase plans to provide incentives to employees. The companies acquire their own shares, hold them until employees achieve certain goals, and then distribute the shares to employees. More advanced accounting courses will discuss the accounting for treasury stock and employee benefits.
The financial effects of a company acquiring its own common stock and holding it, are a decrease in resources (assets) and an equal decrease in sources of resources (stockholders' equity). Assets and stockholders' equity both decrease by the dollar amount the company pays to acquire the stock.
Treasury Stock (9500*45) 427500
Cash 427500
Treasury Stock Purchased
May 1 Cash Dividends 235000
Dividends Payable 235000
(Record declaration of Common dividends)
Description :
- Cash dividends is a contra capital temporary account.This account decreases stock holders equity and is closed as dividends are paid off.So the account is debited
-Common dividends payable is liability account.Since the liability to pay dividends increased,liability increased
Dividend declared = No.of Shares * Dividend per share
= 22,000*2.5 =55000 (Prefered Shares)
= 225000*0.80 = 180000 (Common Stock)
June 1 Dividend payable 235000
Cash 235000
(Being Cash dividends paid)
Sep 17 Resale. If the treasury stock is resold at a later date, offset the sale price against the treasury stock account, and credit any sales exceeding the repurchase cost to the additional paid-in capital account. If the sale price is less than the repurchase cost, charge the differential to any additional paid-in capital remaining from prior treasury stock transactions, and any residual amount to retained earnings if there is no remaining balance in the additional paid-in capital account.
Cash (3000*50) 150000
Additional Paid in Capital (3000*5) 15000
Treasury Stock (3000*45) 135000
Nov 2 Cash Dividends 235000
Dividends Payable 235000
(Record declaration of Common dividends)
Nov 2 Retained Earnings ( 225000*3% = 6750) $ 6750 *42 Market Value 283500
Common Stock dividend distributable (6750*40) 270000
Additional Paid In Capital (6750*2) 13500
Common Stock dividend distributable (6750*40) 270000
Common Stock 270000
(Being Dividend distributed)
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