The Stockholders Equity section of Nilsson Corporations balance sheet as of December 31, 2010, is as follows:

Question:

The Stockholders’ Equity section of Nilsson Corporation’s balance sheet as of December 31, 2010, is as follows:

Common stock ($5 par, 500,000 shares authorized,

275,000 issued and outstanding) . . . . . . . . . . . . . . . . . . . . . . . $1,375,000

Paid-in capital in excess of par . . . . . . . . . . . . . . . . . . . . . . . . . . . 550,000

Total paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,925,000

Unappropriated retained earnings . . . . . . . . . . . . . . . . . . . . . . $1,335,000

Appropriated retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . 500,000

Total retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,835,000

Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,760,000

Nilsson Corporation had the following stockholders’ equity transactions during 2011:

Jan. 15 Completed the building renovation, for which $500,000 of retained earnings had been restricted. Paid the contractor $485,000, all of which is capitalized.

Mar. 3 Issued 100,000 additional shares of the common stock for $8 per share.

May 18 Declared a dividend of $1.50 per share to be paid on July 31, 2011, to stockholders of record on June 30, 2011.

June 19 Approved additional building renovation to be funded internally. The estimated cost of the project is $400,000, and retained earnings are to be restricted for that amount.

July 31 Paid the dividend.

Nov. 12 Declared a property dividend to be paid on December 31, 2011, to stockholders of record on November 30, 2011. The dividend is to consist of 35,000 shares of Hampton Inc. stock that are currently recorded in Nilsson’s books at $9 per share. The fair market value of the stock on November 12 is $13 per share.

Dec. 31 Reported $885,000 of net income on the December 31, 2011, income statement. (Assume that revenues and expenses were closed to a temporary account, Income Summary. Use this account to complete the closing process.) In addition, the stock was distributed in satisfaction of the property dividend. The Hampton stock closed at $14 per share at the end of the day’s trading.

Instructions:

1. Make all necessary journal entries for Nilsson to account for the transactions affecting stockholders’ equity.

2. Prepare the December 31, 2011, Stockholders’ Equity section of the balance sheet for Nilsson.

Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on... Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial... Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may... Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...