Problem NO: 11

Earnhart Corporation has outstanding 3,000,000 shares of common stock of a par value of $10 each. The balance in its Retained Earnings account at Janu

Earnhart Corporation has outstanding 3,000,000 shares of common stock of a par value of $10 each. The balance in its Retained Earnings account at January 1, 2014, was $24,000,000, and it then had Paid-in Capital in Excess of Par—Common Stock of $5,000,000. During 2014, the company’s net income was $4,700,000. A cash dividend of $0.60 a share was declared on May 5, 2014, and was paid June 30, 2014, and a 6% stock dividend was declared on November 30, 2014, and distributed to stockholders of record at the close of business on December 31, 2014. You have been asked to advise on the proper accounting treatment of the stock dividend.

\r\n

The existing stock of the company is quoted on a national stock exchange. The market price of the stock has been as follows.

\r\n

October 31, 2014 $31

\r\n

November 30, 2014 $34

\r\n

December 31, 2014 $38

\r\n

Instructions

\r\n

(a) Prepare the journal entry to record the declaration and payment of the cash dividend.

\r\n

(b) Prepare the journal entry to record the declaration and distribution of the stock dividend.

\r\n

(c) Prepare the stockholders’ equity section (including schedules of retained earnings and additionalpaid-in capital) of the balance sheet of Earnhart Corporation for the year 2014 on the basis of the foregoing information. Draft a note to the financial statements setting forth the basis of the accounting for the stock dividend, and add separately appropriate comments or explanations regarding the basis chosen.

0  reviews

Suggestions based on the Question and Answer that you are currently viewing

Snider Corporation, a publicly traded company, is preparing the interim financial data which it will issue to its shareholders at the end of the first

Snider Corporation, a publicly traded company, is preparing the interim financial data which it will issue to its shareholders at the end of the first quarter of the 2014–2015 fiscal year. Snider’s financial accounting department has compiled the following summarized revenue and expense data for the first quarter of the year. Sales revenue $60,000,000 Cost of goods sold 36,000,000 Variable selling expenses 1,000,000 Fixed selling expenses 3,000,000 Included in the fixed selling expenses was the single lump-sum payment of $2,000,000 for television advertisements for the entire year. Instructions (a) Snider Corporation must issue its quarterly financial statements in accordance with IFRS regarding interim financial reporting. (1) Explain whether Snider should report its operating results for the quarter as if the quarter were a separate reporting period in and of itself, or as if the quarter were an integral part of the annual reporting period. (2) State how the sales revenue, cost of goods sold, and fixed selling expenses would be reflected in Snider Corporation’s quarterly report prepared for the first quarter of the 2014–2015 fiscal year. Briefly justify your presentation. (b) What financial information, as a minimum, must Snider Corporation disclose to its shareholders in its quarterly reports?

(0)

The benefits of buying with AnswerDone:

Guaranteed quality through customer reviews

Access to High-Quality Documents

Our platform features a wide range of meticulously curated documents, from solved assignments and research papers to detailed study guides. Each document is reviewed to ensure it meets our high standards, giving you access to reliable and high-quality resources.

Quick and easy check-out

Easy and Secure Transactions

We prioritize your security. Our platform uses advanced encryption technology to protect your personal and financial information. Buying with AnswerDone means you can make transactions with confidence, knowing that your data is secure

Focus on what matters

Instant Access

Once you make a purchase, you’ll have immediate access to your documents. No waiting periods or delays—just instant delivery of the resources you need to succeed.

$1.49  0x  sold
    (0)
  Add to cart