Entries for Selected Corporate Transactions

Selected transactions completed by Big Water Boating Corporation during the current fiscal year are as follows:

Instructions:

Journalize the transactions. If no entry is required, select "No entry required" from the dropdown box and leave the amount boxes blank. For a compound transaction, if an amount box does not require an entry, leave it blank.

Jan. 3. Split the common stock 4 for 1 and reduced the par from $160 to $40 per share. After the split, there were 380,000 common shares outstanding.

Apr. 7. Purchased 30,000 shares of the corporation's own common stock at $44, recording the stock at cost.

May 1. Declared semiannual dividends of $3.90 on 30,000 shares of preferred stock and $0.25 on the common stock to stockholders of record on May 15, payable on June 1.

June 1. Paid the cash dividends.

July 29. Sold 22,000 shares of treasury stock at $49, receiving cash.

Nov. 15. Declared semiannual dividends of $3.90 on the preferred stock and $0.31 on the common stock (before the stock dividend).

Nov. 15. A 2% common stock dividend was declared on the common stock outstanding. The fair market value of the common stock is estimated at $51.

Dec. 31. Paid the cash dividends.

Dec. 31. Issued the certificates for the common stock dividend.

Review the effect of stock splits on equity accounts. The purchase of treasury stock is typically recorded using the cost method. When the company resells shares of treasury stock pay attention to the price these shares are being sold for and the price originally paid to reacquire these shares. On the date of declaration of a cash dividend, the corporation is legally obligated to pay that dividend. When the company declares a cash or stock dividend keep in mind the previous stock transactions that have occurred; would these transactions have any affect on the amount of the cash dividend? Recall that a stock dividend affects only stockholders' equity.

Learning Objective 3, Learning Objective 4, Learning Objective 5 and Learning Objective 7.