Problem 11-8A Date Account Titles and Explanation Debit Credit (To close net inc
ID: 2470032 • Letter: P
Question
Problem 11-8A
Date
Account Titles and Explanation
Debit
Credit
(To close net income)
(To close stock dividends)
(To close cash dividends)
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Common Stock
Retained Earnings
Paid-in Capital in Excess of Par Value
Cash Dividends
Common Stock Dividends Distributable
Stock Dividends
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EVERETT CORPORATION
Partial Balance Sheet
December 31, 2014
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Problem 11-8A
On January 1, 2014, Everett Corporation had these stockholders’ equity accounts.Common Stock ($10 par value, 72,900 shares issued and outstanding) $729,000 Paid-in Capital in Excess of Par Value 500,600 Retained Earnings 611,500
During the year, the following transactions occurred.
Jan. 15 Declared a $0.40 cash dividend per share to stockholders of record on January 31, payable February 15. Feb. 15 Paid the dividend declared in January. Apr. 15 Declared a 10% stock dividend to stockholders of record on April 30, distributable May 15. On April 15, the market price of the stock was $15 per share. May 15 Issued the shares for the stock dividend. Dec. 1 Declared a $0.60 per share cash dividend to stockholders of record on December 15, payable January 10, 2015. Dec. 31 Determined that net income for the year was $371,300.
Explanation / Answer
Answer 1
Journal Entries
15 Jan
Cash dividend A/c Dr. 29160
To Dividend Payable A/c cr. 29160
15 Feb
Dividend Pyable A/c Dr. 29160
To Cash A/c cr. 29160
15 April
Stock Dividends A/c Dr. $109350
To Commom stock dividend distributable A/c cr.72900
To Paid in Capital in excess of par.A/c cr. 36450
15 May
Commom stock dividend distributable A/c Dr. 72900
To Common Stock A/c cr. 72900
1 Dec
Cash dividend A/c Dr. 48114
To Dividend Payable A/c cr. 48114
31 Dec
Income Summary A/c dr. 371300
To Retained Earnings A/c cr. 371300
31 Dec
Retained Earnings A/c Dr. 186624
To stock Dividends A/c cr. 109350
To cash dividends A/c cr. 77274
Answer 2
Common Stock
Retained Earnings
Paid-in Capital in Excess of Par Value
Cash Dividends
Stock Dividends
Answwer 3
BALANCE SHEET
Answer 4
Payout ratio => 77274 / 371300 => 20.8%
Return on common stockholders’ equity => [371300 / (1841100+2135126) /2 ] => 18.7%
Particulars Debit Particulars Credit Begg. balance 729000 Stock dividends 72900 Closing Balance 801900