On January 1, 2010, Werth Corporation had these stockholders equity accounts. Common Stock ($10 par value, 80,000

Question:

On January 1, 2010, Werth Corporation had these stockholders’ equity accounts. Common Stock ($10 par value, 80,000 shares issued and outstanding) .....$800,000

Paid-in Capital in Excess of Par Value ...........500,000

Retained Earnings ...................620,000

During the year, the following transactions occurred.

Jan. 15 Declared a $0.50 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 $14 per share.

May 15 Issued the shares for the stock dividend.

Dec. 1 Declared a $0.55 per share cash dividend to stockholders of record on December 15, payable January 10, 2011.

31 Determined that net income for the year was $400,000.

Instructions

(a) Journalize the transactions. (Include entries to close net income and dividends to Retained Earnings.)

(b) Enter the beginning balances and post the entries to the stockholders’ equity T accounts.

(Note: Open additional stockholders’ equity accounts as needed.)

(c) Prepare the stockholders’ equity section of the balance sheet at December 31.

(d) Calculate the payout ratio and return on common stockholders’ equity ratio.


Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on...
Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...
Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
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...
Par Value
Par value is the face value of a bond. Par value is important for a bond or fixed-income instrument because it determines its maturity value as well as the dollar value of coupon payments. The market price of a bond may be above or below par,...
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Related Book For  book-img-for-question

Financial Accounting Tools for Business Decision Making

ISBN: 978-0470239803

5th Edition

Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso

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