Part A In late 2017, the Nicklaus Corporation was formed. The corporate charter
ID: 2431331 • Letter: P
Question
Part A
In late 2017, the Nicklaus Corporation was formed. The corporate charter authorizes the issuance of 6,000,000 shares of common stock carrying a $1 par value, and 2,000,000 shares of $5 par value, noncumulative, nonparticipating preferred stock. On January 2, 2018, 4,000,000 shares of the common stock are issued in exchange for cash at an average price of $10 per share. Also on January 2, all 2,000,000 shares of preferred stock are issued at $30 per share.
Required:
1. Prepare journal entries to record these transactions.
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 $1,700,000.)
Part B
During 2018, the Nicklaus Corporation participated in three treasury stock transactions:
On June 30, 2018, the corporation reacquires 240,000 shares for the treasury at a price of $12 per share.
On July 31, 2018, 20,000 treasury shares are reissued at $15 per share.
On September 30, 2018, 20,000 treasury shares are reissued at $10 per share.
Required:
1. Prepare journal entries to record these transactions.
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 $3,200,000.)
Part C
On October 1, 2018, Nicklaus Corporation receives permission to replace its $1 par value common stock (6,000,000 shares authorized, 4,000,000 shares issued, and 3,800,000 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 $0.17 per share cash dividend on common stock and a $0.34 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 152,000 (0.02 × 7,600,000) additional shares being issued to shareholders.
Required:
1. Prepare journal entries to record the declaration and payment of these stock and cash dividends.
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 $2,700,000.)
3. Prepare a statement of shareholders' equity for Nicklaus Corporation for 2018.
Explanation / Answer
Part A 1 Journal entries 2-Jan Cash $40,000,000 Common Stock $4,000,000 Additional paid in capital-Common stock $36,000,000 2-Jan Cash $60,000,000 Preferred stock $10,000,000 Additional paid in capital-Preferred stock $50,000,000 2 Balance Sheet as of March 31, 2018 (Partial) Common Stock $4,000,000 APIC-Common Stock $36,000,000 Preferred Stock $10,000,000 APIC-Preferred Stock $50,000,000 Retained earnings $1,700,000 Total stockholder's equity $101,700,000 Part B 1 Journal entries 30-Jun Treasury stock $2,880,000 Cash $2,880,000 31-Jul Cash $300,000 Treasury stock $240,000 Paid in capital for Treasury stock $60,000 30-Sep Cash $200,000 Paid in capital for Treasury stock $40,000 Treasury stock $240,000 2 Balance Sheet as of September 30, 2018 (Partial) Common Stock $4,000,000 APIC-Common Stock $36,000,000 Preferred Stock $10,000,000 APIC-Preferred Stock $50,000,000 Paid in capital from Treasury stock $20,000 Retained earnings $4,900,000 Subtotal $104,920,000 Less: Treasury stock at cost $2,400,000 Total stockholder's equity $102,520,000 Part C 1 Journal entries 1-Nov Retained earnings $1,972,000 Dividend payable-common stock $1,292,000 Dividend payable-preferred stock $680,000 1-Dec Dividend payable-common stock $1,292,000 Dividend payable-preferred stock $680,000 Cash $1,972,000 2-Dec Retained earnings $1,520,000 Common stock dividend distributable $76,000 Addittional paid in capital $1,444,000 28-Dec Common stock dividend distributable $76,000 Common stock $76,000 2 Balance Sheet as of December 31, 2018 (Partial) Common Stock $4,076,000 APIC-Common Stock $37,444,000 Preferred Stock $10,000,000 APIC-Preferred Stock $50,000,000 Paid in capital from Treasury stock $20,000 Retained earnings $4,108,000 Subtotal $105,648,000 Less: Treasury stock at cost $2,400,000 Total stockholder's equity $103,248,000