Question

PB8.

LO 14.3Tent & Tarp Corporation is a manufacturer of outdoor camping equipment. The company was incorporated ten years ago. It is authorized to issue 50,000 shares of $10 par value 5% preferred stock. It is also authorized to issue 500,000 shares of $1 par value common stock. It has issued 5,000 common shares and 2,000 of the preferred shares. The corporation has never declared a dividend and the preferred shares are one years in arrears. Tent & Tarp has the following transactions:

Mar. 1	Declares a cash dividend of $10,000
Mar. 30	Pays the cash dividend
Jul. 10	Declares a 5-for-1 stock split of its common shares

Journalize these transactions. For the stock split, show the calculation for how many shares are outstanding after the split and the par value per share after the split

Answer 1

Journal Entries:

Date Debit $ Credit $ Particulars Issue of 5000 Common Shares at par Bank Account To Common Stock Account $5,000 $5,000 Issue of 2000 Preference Shares at par Bank Account To Preference Stock Account $20,000 $20,000 Payment of Preference Dividend for Arrears Preference Dividend Payable Account To Bank Account $1,000 $1,000 Payment of Preference Dividend for Current year Preference Dividend Account To Bank Account $1,000 $1,000 Mar 01 Declaration of Cash Dividend Retained Earning Account To Cash Dividend Payable Account $10,000 $10,000 Mar 30 Payment of Cash Dividend for Current year Cash Dividend Payable Account To Bank Account $10,000 $10,000

Calculation for Outstanding shares after split