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