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    Parallel Consulting Ltd

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    Parallel Consulting Ltd began 1 Jan 2006 with 200,000 shares of $1 par value common stock outstanding. The stockholders' equity is as follows:

    Stockholders' equity
    Capital stock:
    Ordinary share, $1 par value,
    1,000,000 shares authorized,
    200,000 shares issued and outstanding $200,000
    Additional paid-in capital:
    Share premium - Ordinary share 500,000
    Total paid-in capital $700,000
    Retained Earnings 150,000
    Total stockholders' equity $850,000

    The company made the following transactions during the year:

    4th April - The company declared and issued a 20% stock dividend. The market value of the share is $2.40.

    8th November - The company declared a two-for-one stock split. The stock split is completed on the same day.

    REQUIRED:

    a) Prepare necessary journal entries for the above stock-related transactions.
    b) If Parallel Consulting had net income of $250,000 and paid cash dividends of $75,000 during the year, prepare the shareholders' equity section of the company's balance sheet as at 31 December 2006.

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    REQUIRED:

    a) Prepare necessary journal entries for the above stock-related transactions.

    4th April - The company declared and issued a 20% stock dividend. The market value of the share is $2.40.

    April 4 Retained Earnings 96,000
    Stock Dividend Distributable 40,000
    Additional paid-in capital 56,000
    (200,000 shares x 20% = 40,000 shares)

    Stock Dividend Distributable ...

    Solution Summary

    This solution is comprised of a detailed explanation to prepare the journal entries and equity section for Parallel Consulting Ltd.

    $2.19

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