On January 1, 2012, Cornell Corporation had these stockholders’

On January 1, 2012, Cornell Corporation had these stockholders’ equity accounts.

Common Stock ($10 par value, 70,000 shares issued and outstanding) ...$700,000

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 $0.60 per share cash dividend to stockholders of record on December 15, payable January 10, 2013.

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.

(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.


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,...