Chapter 18 - Stock Split

Part C On October 1, 2021, Nicklaus Corporation receives permission to replace its $1 par value common stock (5,000,000 shares authorized 3,000,000 shares issued, and 2,900,000 shares outstanding) with a new common stock issue having a $0.50 par value. Since the new par value is one-half the amount of the old, this represents a 2-for-1 stock split. That is, the shareholders will receive two shares of the $0.50 par stock in exchange for each share of the $1 par stock they own. The $1 par stock will be collected and destroyed by the issuing corporation On November 1, 2021, the Nicklaus Corporation declares a $0.05 per share cash dividend on common stock and a $0.25 per share cash dividend on preferred stock. Payment is scheduled for December 1, 2021, to shareholders of record on November 15, 2021. On December 2, 2021, the Nicklaus Corporation declares a 1% stock dividend payable on December 28, 2021, to shareholders of record on December 14. At the date of declaration, the common stock was selling in the open market at $10 per share. The dividend will result in 58,000 (0.01* 5,800,000) additional shares being issued to shareholders. Required: 1. Prepare journal entries to record the declaration and payment of these stock and cash dividends. 2. Prepare the December 31, 2021, shareholders' equity section of the balance sheet for the Nicklaus Corporation. (Assume net income for the fourth quarter was $2,500,000.) 3. Prepare a statement of shareholders' equity for Nicklaus Corporation for 2021. R. :X: .. 1 Record the entry for the 2-for-1 stock split. 2 Record declaration of cash dividend for common shares and preferred shares. 3 Record the entry on date of record. 4 Record payment of cash dividend for common shares and preferred shares. 5 Record declaration of common stock dividend. 6 Record distribution of common stock dividend. Note : = journal entry has been entered