Problem 10-85A (Algorithmic)
Common Dividends
Pumpkin Accounting Corp. began 2019 with 1,000,000 authorized and 231,000 issued and outstanding $10 par common shares. During 2019, Pumpkin entered into the following transactions:
Required:
1. Prepare journal entries for each of these transactions.
2019 a. Mar. 10 |
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(Record liability for dividends) | |||
b. Apr. 10 |
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(Record payment of dividends) | |||
c. May 2 |
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(Record purchase of treasury shares) | |||
d. June 9 |
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(Record reissue of treasury shares) | |||
e. Aug. 10 |
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(Record liability for dividends) | |||
f. Sept. 10 |
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(Record payment of dividends) | |||
g. Oct. 15 |
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(Record small stock dividend) | |||
h. Nov. 10 |
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(Record liability for dividends) | |||
i. Dec. 10 |
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(Record payment of dividends) |
Feedback
2. Determine the total dollar amount of
dividends (cash and stock) for the year.
$
3. Conceptual Connection: Determine the effect on total assets and total stockholders' equity of the dividend transactions.
Note the following:
Transaction | Effect on Assets | Effect on Stockholders' Equity | |
a. |
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$ | $ |
b. |
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$ | $ |
c. |
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$ | $ |
d. |
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$ | $ |
e. |
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$ | $ |
f. |
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$ | $ |
g. |
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$ | $ |
h. |
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$ | $ |
i. |
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$ | $ |
Total effect | $ | $ |
1. Prepare journal entries for each of these transactions.
2019 a. Mar. 10 |
Retained Earnings (or Dividends) |
92400 | |
Dividends Payable [0.40*231000] |
92400 | ||
(Record liability for dividends) | |||
b. Apr. 10 |
Dividends Payable |
92400 | |
Cash |
92400 | ||
(Record payment of dividends) | |||
c. May 2 |
Treasury Stock |
192000 | |
Cash |
192000 | ||
(Record purchase of treasury shares) | |||
d. June 9 |
Cash |
78000 | |
Common Stock |
72000 | ||
Additional Paid-In Capital-Common Stock |
6000 | ||
(Record reissue of treasury shares) | |||
e. Aug. 10 |
Retained Earnings (or Dividends) |
124300 | |
Dividends Payable(226000*0.55) |
124300 | ||
(Record liability for dividends) | |||
f. Sept. 10 |
Dividends Payable |
124300 | |
Cash |
124300 | ||
(Record payment of dividends) | |||
g. Oct. 15 |
Retained Earnings (226000*28*10%) |
632800 | |
Common Stock |
226000 | ||
Additional Paid-In Capital-Common Stock |
406800 | ||
(Record small stock dividend) | |||
h. Nov. 10 |
Retained Earnings (or Dividends) |
135600 | |
Dividends Payable (226000*0.60) |
135600 | ||
(Record liability for dividends) | |||
i. Dec. 10 |
Dividends Payable |
135600 | |
cash |
135600 | ||
(Record payment of dividends) |
Part 2:
Total dividend paid: | ||||
Cash dividend (135600+124300+92400) | 352300 | |||
Stock dividend | 632800 | |||
Total dividend paid: | 985100 |
Req 3. | ||||
Transactions | Effect on Asset | Effect on Equity | ||
a. affects stockholder equity | 0 | 92400 | ||
b. Affect Assets | 92400 | 0 | ||
c. No effect | 0 | 0 | ||
d. No effect | 0 | 0 | ||
e. Affects stockholder equity | 0 | 12300 | ||
f. Affects equity | 12300 | |||
g. No effect of Stock dividend | 0 | 0 | ||
h. Affects stockholder equity | 0 | 135600 | ||
i. Affects equity | 135600 | 0 | ||
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