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Preparing Correcting Entries for the Springer Company

Before preparing financial statements for the current year, the chief accountant for Springer Company discovered the following errors in the company accounts:

1. The declaration and payment of a $50,000 cash dividend was recorded as a debut to Interest Expense $50,000, and a credit to Cash $50,000.

2. A 10% stock dividend (1,000 shares0 was declared on the $10 par value stock when the market value per share was $16. The only entry made was; Retained Earnings (Dr.) $10,000 and Dividends Payable (Cr.) $10,000. The shares have not been issued.

3. A 4-for-1 stock split involving the issue of 400,000 shares of $5 par value common stock for 100,000 shares of $20 par value common stock was recorded as a debit to Retained Earnings $2,000,000 and a credit to Common Stock $2,000,000.

Prepare the correcting entries at December 31.

Solution Summary

A formatted Excel spreadsheet containing the correcting journal entries to the Springer Company accounts for the period ending December 31 is attached.