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Comprehensive Included in the December 31, 2012, Jacobi Company balance sheet was the following shareholders' equity section: The company engaged in the following stock transactions

Comprehensive Included in the December 31, 2012, Jacobi Company balance sheet was the following shareholders' equity section: The company engaged in the following stock transactions during 2013: Required: Hide 1. Prepare journal entries to record the preceding transactions. If a memo entry is required, select "Memo entry" from dropdown and leave the amount box blank or enter "0". For a compound transaction, if an amount box does not require an entry, leave it blank. Jan. 4 Dividends Payable: Preferred Dividends Payable: Common 48000 Cash Jan. 5 Cash 55000 Preferred Stock, $100 Par 50000 Additional Paid-in Capital on Preferred Stock 5000 Jan. 22 Cash 92000 Common Stock, $5 Par 20000 Additional Paid-in Capital on Common Stock 72000 Apr. 2 Cash 16800 Treasury Stock 14000 Additional Paid-in Capital from Treasury Stock 2800 May 14 Retained Earnings Common Stock to Be Distributed Additional Paid-in Capital from Stock Dividend June 4 Retained Earnings Dividends Payable: Preferred June 29 Common Stock to Be Distributed Common Stock, $5 Par July 5 Dividends Payable: Preferred Cash July 20 Memo entry Memo entry Aug. 3 Declare Div. Loss on Disposal of Investment Unrealized Decrease in Value Available-for-Sale Securities Allowance for Change in Value of Investment Div. Payable Retained Earnings Property Dividend Payable Sept. 14 Property Dividend Payable Allowance for Change in Value of Investment Investment in Drot Company Stock Dec . 3 Retained Earnings Dividends Payable: Preferred Dividends Payable: Common Hide Feedback Partially Correct Check My Work Feedback Jan. 4 A corporation records the declaration of a cash dividend by debiting retained earnings and crediting dividends payable. It records the payment by debiting dividends payable and crediting cash Jan. 5 When a company issues preferred stock for cash, you should record the total par value (Number of Shares x Par Value per Share) in the Preferred Stock account, with any excess recorded as Additional Paid-in Capital. Jan. 22 When a company issues common stock for cash, you should record the total par value (Number of Shares x Par Value per Share) in the Common Stock account, with any excess recorded as Additional Paid-in Capital. You should treat common stock issued with a stated value in the same manner. Apr. 2 Under the cost method, when the corporation reacquires its capital stock it debits an account entitled Treasury Stock (and credits Cash or other appropriate asset account) for the cost paid to reacquire the shares. When the corporation reissues the treasury shares, it reduces (credits) the Treasury Stock account for the cost of the shares reissued and records the difference between the cash received and the cost of the reissued shares as an adjustment of shareholders' equity. If the cash received exceeds the cost of the reissued treasury stock, it records the excess as an increase in additional paid-in capital from treasury stock. If the cash is less than the cost, it records the "deficit" as a reduction of additional paid-in capital from treasury stock. If the additional paid-in capital from treasury stock is insufficient to absorb the deficit, the corporation records the remainder as a reduction in retained earnings. May 14 You should account for a small stock dividend by transferring from retained earnings to contributed capital an amount equal to the fair value of the additional shares issued. In distinguishing between a small and a large stock dividend, GAAP states that fair value is ordinarily the appropriate value to use whenever the stock dividend (that is, small dividend) is less than 20% or 25% of the previously outstanding shares. You should account for a large stock dividend by transferring from retained earnings to contributed capital an amount equal to the par value of the additional shares issued. June 4 A corporation records the declaration of a cash dividend by debiting retained earnings and crediting dividends payable. It records the payment by debiting dividends payable and crediting cash. June 29 You should account for a small stock dividend by transferring from retained earnings to contributed capital an amount equal to the fair value of the additional shares issued. In distinguishing between a small and a large stock dividend, GAAP states that fair value is ordinarily the appropriate value to use whenever the stock dividend (that is, small dividend) is less than 20% or 25% of the previously outstanding shares. You should account for a large stock dividend by transferring from retained earnings to contributed capital an amount equal to the par value of the additional shares issued. July 5 A corporation records the declaration of a cash dividend by debiting retained earnings and crediting dividends payable. It records the payment by debiting dividends payable and crediting cash. July 20 From an accounting standpoint, a stock split has no dollar effect on any element of the corporation's shareholders' equity. Consequently, a stock split has no effect on total shareholders' equity. A corporation ordinarily records a stock split by a memorandum entry that indicates the new par value, the total number of shares issued, and the impact (if any) on the number of authorized shares. Aug. 3 GAAP requires a corporation to record a property dividend at the fair value of the asset transferred. Therefore, the corporation would remove the asset distributed by crediting the asset account for the book value of the asset, it would debit Retained Earnings by the amount of the fair value of the asset distributed, and it would recognize a gain (or loss) in income if the asset fair value is greater than (less than) book value. When investment securities are distributed as a property dividend, you should revalue the investment account to its current fair value on the declaration date and record the dividend obligation at this value so that the amounts of both the gain and the dividend liability are properly reported. Sept. 14 GAAP requires a corporation to record a property dividend at the fair value of the asset transferred. Therefore, the corporation would remove the asset distributed by crediting the asset account for the book value of the asset, it would debit Retained Earnings by the amount of the fair value of the asset distributed, and it would recognize a gain (or loss) in income if the asset fair value is greater than (less than) book value. When investment securities are distributed as a property dividend, you should revalue the investment account to its current fair value on the declaration date and record the dividend obligation at this value so that the amounts of both the gain and the dividend liability are properly reported. Dec. 3 A corporation records the declaration of a cash dividend by debiting retained earnings and crediting dividends payable. It records the payment by debiting dividends payable and crediting cash. Hide 2. Prepare the December 31, 2013, shareholders' equity section (assume that 2013 net income was $270,000). JACOBI COMPANY Stockholders' Equity Section December 31, 2013 Contributed Capital: Preferred stock (6%, $100 par) $ Additional paid-in capital on preferred stock $ Common stock ($2.50 par) $ Additional paid-in capital on common stock Additional paid-in capital from treasury stock Additional paid-in capital from stock dividend Total contributed capital $ Retained earnings Accumulated other comprehensive income (loss): Unrealized decrease in value of available-for-sale securities Total contributed capital, retained earnings, and accumulated other comprehensive income $ Less: Treasury stock Total shareholders' equity $

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