Fuken Inc. had the following balances in its shareholders equity accounts at December 31, 2014: Share Capital

Question:

Fuken Inc. had the following balances in its shareholders’ equity accounts at December 31, 2014:

Share Capital

Common Shares, unlimited number of shares authorized,

50,000 shares issued and outstanding ....$8,000,000

Retained Earnings.......... 750,000

Total Shareholders’ Equity........$8,750,000

During 2014, Fuken completed the following selected transactions related to shareholders’ equity:

Mar 15 Purchased and retired 4,500 common shares at $150 per share.

Jul 21 Purchased and retired 3,500 common shares at $170 per share.

Dec 28 Declared a 2-for-1 stock split effective on this date.

Dec 30 Fuken reported net income for the year of $325,000

Requirements

1. Prepare journal entries to account for the transactions during 2014.

2. Assume that instead of a 2-for-1 split, the board of directors declared a 5% stock dividend when the market price was $175. The stock dividends were to be distributed on January 31, 2015. Prepare the journal entry to account for the stock dividend.
3. Prepare the company’s shareholders’ equity section at December 31, 2014 for

(a) The stock split

(b) The stock dividend.

Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...