Problem 5: On January 1, 2020, Holt Corporation had $1,000,000 of common stock outstanding that was issued at par and retained earnings of $750,000. The company issued 60,000 shares of common stock at par on July 1 and earned net income of $400,000 for the year. Instructions: Journalize the declaration of a 15% stock dividend on December 10, 2020, for the following two independent assumptions. (a) Par value is $10 and market value is $16. (b) Par value is $5 and market value is $8. Problem 6: $480,000 GORNI COMPANY Income Statement For the Year Ended December 31, 2017 Sales Less: Cost of Goods Sold $290,000 Operating Expenses (Excluding Depreciation) 60,000 Depreciation Expense 17,000 Income Taxes 15,000 Interest Expense 13,000 Loss on Disposal of Plant Assets 8.000 Net income 403,000 $ 77.000 2016 GORNI COMPANY Comparative Balance Sheet December 31 2017 Assets Cash $12.900 Accounts Receivable 82,000 Inventories 120,000 Prepaid Expenses 19,000 Investments 80,000 Plant Assets 310,000 Accumulated Depreciation (65.000) Total $616.000 Liabilities and Stockholders' Equity Accounts Payable $85.000 Accrued Expenses Payable 22,000 Bonds Payable 130,000 Common Stock 245,000 Retained Earnings 134,000 Total $616.000 $ 35,000 53,000 132,000 25,000 65,000 250,000 (60,000) $500,000 $ 75,000 24,000 150,000 170,000 81,000 $500,000 $480,000 Sales Less: Cost of Goods Sold Operating Expenses (Excluding Depreciation) Depreciation Expense Income Taxes Interest Expense Loss on Disposal of Plant Assets Net income $290,000 60,000 17,000 15,000 13,000 8,000 403,000 $ 77.000 2016 GORNI COMPANY Comparative Balance Sheet December 31 2017 Assets Cash $72.000 Accounts Receivable 82,000 Inventories 120,000 Prepaid Expenses 19,000 Investments 80,000 Plant Assets 310,000 Accumulated Depreciation (65.000) Total $616.000 Liabilities and Stockholders' Equity Accounts Payable $85.000 Accrued Expenses Payable 22,000 Bonds Payable 130,000 Common Stock 245,000 Retained Earnings 134,000 Total $616,000 $ 35,000 53,000 132,000 25,000 65,000 250,000 (60,000) $500,000 $ 75,000 24,000 150,000 170,000 81,000 $500,000 Additional information: 1. New plant assets costing $85,000 were purchased for cash in 2017. 2. Old plant assets costing $25,000 were sold for $5,000 cash when book value was $13,000. 3. Bonds with a face value of $20,000 were converted into $20,000 of common stock. 4. A cash dividend was declared and paid during the year. Instructions: Prepare a statement of cash flows for the year using the indirect method
