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Common & Preferred Stock and Issuances Dividends

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Permabilt Corp. was incorporated on January 1, 2010, and issued the following stock for cash:
3,600,000 shares of no-par common stock were authorized; 1,050,000 shares were issued on January 1, 2010, at $46 per share.

1,200,000 shares of $100 par value, 10.5% cumulative, preferred stock were authorized, and 420,000 shares were issued on January 1, 2010, at $132 per share.

Net income for the years ended December 31, 2010, 2011, and 2012, was $15,750,000, $22,350,000, and $26,100,000, respectively.

No dividends were declared or paid during 2010 or 2011. However, on December 17, 2012, the board of directors of Permabilt Corp. declared dividends of $37,200,000, payable on February 9, 2013, to holders of record as of January 4, 2013.

Required:
a) Write the entry to show the effects of:
1. The issuance of common stock and preferred stock on January 1, 2010
2. The declaration of dividends on December 17, 2012
3. The payment of dividends on February 9, 2013
b) Of the total amount of dividends declared during 2012, how much will be received by preferred shareholders?

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Your tutorial is attached and shows you how all the activity impacts ...

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Your tutorial is attached and shows you how all the activity impacts the shareholder's equity section, the journal entries for issuance of shares and dividends declared and paid. The split between preferred and common is shown to include handling of the two years in arrears.

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See Also This Related BrainMass Solution

Prepare journal entries to record the following four separate issuances of stock

Need help with how to prepare these 2 problems.

EXERCISES 13-3
Prepare journal entries to record the following four separate issuances of stock:
1. Two thousand shares of no-par common stock are issued to the corporation's promoters in exchange
for their efforts, estimated to be worth $30,000. The stock has no stated value.
2. Two thousand shares of no-par common stock are issued to the corporation's promoters in exchange
for their efforts, estimated to be worth $30,000. The stock has a $1 per share stated value.
3. Four thousand shares of $10 par value common stock are issued for $70,000 cash.
4. One thousand shares of $100 par value preferred stock are issued for $120,000 cash.

EXERCISES 13-7

On June 30, 2005, Scizzory Corporation's common stock is priced at $31 per share before any stock dividend or split, and the stockholders' equity section of its balance sheet appears as follows:

Common stock?$10 par value, 60,000 shares
authorized, 25,000 shares issued and outstanding . . . . . . . . . . . . $250,000
Contributed capital in excess of par value, common stock . . . . . . . 100,000
Total contributed capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 350,000
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 330,000
Total stockholders' equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $680,000

1. Assume that the company declares and immediately distributes a 100% stock dividend. This event is recorded by capitalizing retained earnings equal to the stock's par value. Answer these questions about stockholders' equity as it exists after issuing the new shares:
a. What is the retained earnings balance?
b. What is the amount of total stockholders' equity?
c. How many shares are outstanding?
2. Assume that the company implements a 2-for-1 stock split instead of the stock dividend in part 1.
Answer these questions about stockholders' equity as it exists after issuing the new shares:
a. What is the retained earnings balance?
b. What is the amount of total stockholders' equity?
c. How many shares are outstanding?
3. Explain the difference, if any, to a stockholder from receiving new shares distributed under a large
stock dividend versus a stock split.

Check (1b) $680,000
(2a) $330,000

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