Part A In late 2017, the Nicklaus Corporation was formed. The corporate charter
ID: 2342729 • Letter: P
Question
Part A
In late 2017, the Nicklaus Corporation was formed. The corporate charter authorizes the issuance of 4,000,000 shares of common stock carrying a $1 par value, and 1,000,000 shares of $5 par value, noncumulative, nonparticipating preferred stock. On January 2, 2018, 2,000,000 shares of the common stock are issued in exchange for cash at an average price of $10 per share. Also on January 2, all 1,000,000 shares of preferred stock are issued at $20 per share.
Required:
1. Prepare journal entries to record these transactions. (1/2 Record issue of common shares. 1/2 Record issue of preferred shares.)
2. Prepare the shareholders' equity section of the Nicklaus balance sheet as of March 31, 2018. (Assume net income for the first quarter 2018 was $1,350,000.)
Part B
During 2018, the Nicklaus Corporation participated in three treasury stock transactions:
On June 30, 2018, the corporation reacquires 160,000 shares for the treasury at a price of $12 per share.
On July 31, 2018, 30,000 treasury shares are reissued at $15 per share.
On September 30, 2018, 30,000 treasury shares are reissued at $10 per share.
Required:
1. Prepare journal entries to record these transactions. (6/30 Record acquisition of treasury stock. 7/31 Record the reissuance of 30,000 treasury shares on July 31st. 9/30 Record the reissuance of 30,000 treasury shares on September 30th.)
2. Prepare the Nicklaus Corporation shareholders' equity section as it would appear in a balance sheet prepared at September 30, 2018. (Assume net income for the second and third quarter was $2,800,000.)
Part C
On October 1, 2018, Nicklaus Corporation receives permission to replace its $1 par value common stock (4,000,000 shares authorized, 2,000,000 shares issued, and 1,900,000 shares outstanding) with a new common stock issue having a $.50 par value. Since the new par value is one-half the amount of the old, this represents a 2-for-1 stock split. That is, the shareholders will receive two shares of the $.50 par stock in exchange for each share of the $1 par stock they own. The $1 par stock will be collected and destroyed by the issuing corporation.
On November 1, 2018, the Nicklaus Corporation declares a $0.10 per share cash dividend on common stock and a $0.27 per share cash dividend on preferred stock. Payment is scheduled for December 1, 2018, to shareholders of record on November 15, 2018.
On December 2, 2018, the Nicklaus Corporation declares a 2% stock dividend payable on December 28, 2018, to shareholders of record on December 14. At the date of declaration, the common stock was selling in the open market at $10 per share. The dividend will result in 76,000 (0.02 × 3,800,000) additional shares being issued to shareholders.
Required:
1. Prepare journal entries to record the declaration and payment of these stock and cash dividends. (10/1 Record the entry for the 2-for-1 stock split. 11/1 Record declaration of cash dividend for common shares and preferred shares.. 11/15 Record the entry on date of record.. 12/1 Record payment of cash dividend for common shares and preferred shares. 12/2 Record declaration of common stock dividend. 12/28 Record distribution of common stock dividend.)
2. Prepare the December 31, 2018, shareholders' equity section of the balance sheet for the Nicklaus Corporation. (Assume net income for the fourth quarter was $2,300,000.)
3. Prepare a statement of shareholders' equity for Nicklaus Corporation for 2018.
Explanation / Answer
Please hit LIKE button if this helped. For any further explanation, please put your query in comment, will get back to you. Part A Requirement-1 Date Account Debit Credit Jan 2 2018 Cash $ 20,000,000 2000000*10 Common Stock $ 2,000,000 2000000*1 Paid-in Capital-Excess of Par, Common $ 18,000,000 Balance Jan 2 2018 Cash $ 20,000,000 1000000*20 Preferred Stock $ 5,000,000 1000000*5 Paid-in Capital-Excess of Par, Preferred $ 15,000,000 Balance Part A Requirement-2 Nicklaus Corporation Balance Sheet-Shareholder's Equity Section March 31, 2018 Shareholders' equity Preferred stock, $5 par, authorized 1,000,000 shares, -Issued and outstanding 1,000,000 shares $ 5,000,000 Common stock, $1 par, authorized 4,000,000 shares, -Issued and outstanding 2,000,000 shares $ 2,000,000 Paid-in capital – excess of par $ 33,000,000 Retained earnings $ 1,350,000 Total shareholders' equity $ 41,350,000 Part B Requirement-1 Date Account Debit Credit Jun 30 2018 Treasury Stock $ 1,920,000 160000*12 Cash $ 1,920,000 160000*12 Jul 31 2018 Cash $ 450,000 30000*15 Treasury Stock $ 360,000 30000*12 Paid-in Capital-share Repurchase $ 90,000 Balance Sep 30 2018 Cash $ 300,000 30000*10 Paid-in Capital-share Repurchase $ 60,000 Balance Treasury Stock $ 360,000 30000*12 Part B Requirement-2 Nicklaus Corporation Balance Sheet-Shareholder's Equity Section September 30, 2018 Working Shareholders' equity Preferred stock, $5 par, authorized 1,000,000 shares, -Issued and outstanding 1,000,000 shares $ 5,000,000 Common stock, $1 par, authorized 4,000,000 shares, -Issued 2,000,000 and outstanding 1,900,000 shares $ 2,000,000 2000000-160000+30000+30000 Paid-in capital – excess of par $ 33,000,000 Paid-in capital – share Repurchase $ 30,000 90000-60000 Retained earnings $ 4,150,000 1350000+2800000 $ 44,180,000 Less: Treasury Stock (100000 Shares at cost) $ -1,200,000 Total shareholders' equity $ 42,980,000 Part C Requirement-1 Date Account Debit Credit Oct 1 2018 No Entry Nov 1 2018 Retained Earning $ 650,000 Dividend Payable-Common $ 380,000 0.10*(1900000*2) Dividend Payable-Preferred $ 270,000 0.27*1000000 Nov 15 2018 No Entry Dec 1 2018 Dividend Payable-Common $ 380,000 Dividend Payable-Preferred $ 270,000 Cash $ 650,000 Dec 2 2018 Retained Earning $ 760,000 76000*10 Common Stock Dividend Distributable $ 38,000 76000*0.5 Paid-in Capital-Excess of Par, Common $ 722,000 Balance Dec 28 2018 Common Stock Dividend Distributable $ 38,000 Common Stock $ 38,000 Part C Requirement-2 Nicklaus Corporation Balance Sheet-Shareholder's Equity Section March 31, 2018 Working Shareholders' equity Preferred stock, $5 par, authorized 1,000,000 shares, -Issued and outstanding 1,000,000 shares $ 5,000,000 Common stock, $1 par, authorized 4,000,000 shares, -Issued 2,000,000 and outstanding 1,900,000 shares $ 2,038,000 2000000+38000 Paid-in capital – excess of par $ 33,722,000 33000000+722000 Paid-in capital – share Repurchase $ 30,000 90000-60000 Retained earnings $ 5,040,000 4150000+2300000-650000-760000 $ 45,830,000 Less: Treasury Stock (100000 Shares at cost) $ -1,200,000 Total shareholders' equity $ 44,630,000 Part C Requirement-3 Nicklaus Corporation Statement of Shareholder's Equity December 31, 2018 Preferred Stock Common Stock Paid in Capital Retained Earning Treasury Stock Total Shareholder Equity Jan 2 2018 Jan 2 2018 issuance of preferred stock $ 5,000,000 $ 15,000,000 $ 20,000,000 issuance of common stock $ 2,000,000 $ 18,000,000 $ 20,000,000 purchase of treasury stock $ -1,920,000 $ -1,920,000 sale of treasury stock $ 30,000 $ 720,000 $ 750,000 net income $ 6,450,000 $ 6,450,000 common cash dividends $ -380,000 $ -380,000 preferred cash dividends $ -270,000 $ -270,000 stock dividend $ 38,000 $ 722,000 $ -760,000 $ - Dec 31 2018 $ 5,000,000 $ 2,038,000 $ 33,752,000 $ 5,040,000 $ -1,200,000 $ 44,630,000