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Parallel Consulting Ltd

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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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 ...

Solution Summary

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

$2.19