Included In The December 31, 2015 Jacobi Company Balance She

Included In The December 31 2015 Jacobi Company Balance Sheet Was Th

Included in the December 31, 2015, Jacobi Company balance sheet was the following shareholders’ equity section: Jacobi Company Balance Sheet (Shareholders' Equity) December 31, Contributed Capital: 2 Preferred stock, 6%, $100 par $200,000. Additional paid-in capital on preferred stock 12,000.00 $212,000. Common stock, $5 par $150,000. Additional paid-in capital on common stock 240,000.,000. Total contributed capital $602,000. Retained earnings 627,000. Accumulated other comprehensive income (loss): 9 Unrealized decrease in value of available-for-sale securities (41,000. Total contributed capital, retained earnings, and accumulated other comprehensive income $1,188,000. Less: Treasury stock (1,000 shares of common stock at cost, acquired on 2/3/,000. Total Shareholders’ Equity $1,168,000.00 The company engaged in the following stock transactions during 2016: Jan. 4 Paid the semiannual dividend on the outstanding preferred stock and a $1.60 per share annual dividend on the outstanding common stock. These dividends had been declared on December 1, 2015. 5 Issued 500 shares of preferred stock at $110 per share. 22 Issued 4,000 shares of common stock at $23 per share. Apr. 2 Reissued 700 shares of treasury stock at $24 per share. May 14 Declared a 10% stock dividend on the outstanding common stock, payable on June 29. The common stock is currently selling for $25 per share. Jun. 4 Declared the semiannual cash dividend on the outstanding preferred stock, payable on July 5. 29 Issued the stock dividend declared on May 14. Jul. 5 Paid the cash dividend declared on June 4. 20 Split the common stock 2-for-1 and reduced the par value to $2.50 per share. Aug. 3 Declared a property dividend, payable to common shareholders on September 14. The dividend consists of an available-for-sale investment in 50 Drot Company bonds. The bonds had been acquired for $45,000, but have a carrying value of $30,000. The bonds are currently selling for $20,000. Sep. 14 Paid the property dividend declared on August 3. Dec. 3 Declared the semiannual cash dividend on the outstanding preferred stock and a $0.90 per share annual dividend on the outstanding common stock. Required: 1. Prepare journal entries to record the preceding transactions. 2. Prepare the December 31, 2016, shareholders’ equity section (assume that 2016 net income was $270,000).

Paper For Above instruction

This paper aims to provide a comprehensive analysis of the 2015 shareholders’ equity component of Jacobi Company and the subsequent stock transactions during 2016, culminating in the preparation of journal entries and an updated shareholders’ equity statement at year-end. The analysis begins with a detailed review of the initial equity section, then proceeds to record the specified transactions, and finally consolidates the new shareholder equity position reflecting net income and the effects of the transactions.

Introduction

Understanding a company's shareholders' equity is essential for analyzing its financial health and capital structure. Shareholders’ equity includes contributed capital, retained earnings, accumulated other comprehensive income or loss, and treasury stock. Changes over a fiscal period result from earnings, dividends, stock issuances, repurchases, and other comprehensive income adjustments. This paper interprets Jacobi Company’s 2015 equity segment, then methodically records the 2016 transactions through journal entries, and concludes with an updated shareholders’ equity statement as of December 31, 2016.

Analysis of December 31, 2015 Shareholders’ Equity

At the end of 2015, Jacobi’s shareholders' equity comprised preferred and common stock, additional paid-in capital, retained earnings, and accumulated other comprehensive income. The preferred stock had a par value of $100, with an annual dividend rate of 6%, totaling $200,000 in value, indicating issuance of 2,000 shares. Additional paid-in capital on preferred stock was recorded at $12,000, totaling $212,000 for preferred equity. On the common side, a par value of $5 per share with a balance of $150,000 suggests 30,000 shares issued. The excess over par, $240,000, added to common stock’s paid-in capital, aggregating contributed capital to $602,000.

Retained earnings stood at $627,000, reflecting accumulated earnings not distributed as dividends. Other comprehensive income recorded a decrease of $41,000 due to unrealized losses on available-for-sale securities, contributing to a total comprehensive income impact. Total contributed capital, retained earnings, and OCI summed to $1,188,000, from which treasury stock of 1,000 shares at cost was subtracted, resulting in total shareholders’ equity of $1,168,000.

Stock Transactions of 2016 and Journal Entries

The transactions in 2016 altered the equity structure significantly:

1. January 4: Declaration and payment of semiannual preferred dividends and annual common dividends totaling $1.60 per share. The journal entry records the dividends payable and subsequent payment:

Debit: Dividends Declared (Preferred & Common)

Credit: Dividends Payable (Preferred & Common)

2. January 5: Issuance of 500 preferred shares at $110:

Debit: Cash (500 × $110) = $55,000

Credit: Preferred Stock (500 × $100 par) = $50,000

Credit: Additional Paid-in Capital - Preferred $5,000

3. January 22: Issuance of 4,000 common shares at $23 per share:

Debit: Cash (4,000 × $23) = $92,000

Credit: Common Stock (4,000 × $2.50 par after split) = $10,000

Credit: Additional Paid-in Capital – Common = $82,000

4. April 2: Reissuance of 700 treasury shares at $24 per share:

Debit: Cash (700 × $24) = $16,800

Credit: Treasury Stock (700 × cost, assume original cost $20 per share) = $14,000

Credit: Additional Paid-in Capital – Treasury Stock = $2,800

5. May 14: Declaration of 10% stock dividend. As shares are split 2-for-1, the number of outstanding shares doubles, and the actual dividend issuance is recorded on the payable date:

Number of shares before dividend: 30,000. The dividend grants 3,000 additional shares (10% of 30,000). Post-split, shares become 60,000, so 3,000 more are issued, proportional to the stock dividend.

Note: Stock dividend increases common stock and paid-in capital accordingly. The journal entry on declaration includes a transfer from retained earnings to common stock and paid-in capital, based on par value of new shares issued.

6. June 4 and 29: Declaration of semiannual preferred dividend and the issuance of stock dividend respectively.

The dividends are recorded as liabilities when declared and paid at respective dates. The stock dividend affects common stock and paid-in capital, while cash dividends are paid subsequently. Similarly, stock split (July 20) doubles the shares and reduces par value, with no journal entry required for the split itself but affects the recorded balances.

7. August 3 and September 14: Declaration and payment of property dividend in bonds, which involves derecognizing bonds’ carrying amount and recognizing a gain/loss based on fair value change.

The property dividend record involves revaluing the bonds from carrying amount to fair value, recognizing a loss if applicable, and declaring the dividend payable to common shareholders. The property asset (bonds) is derecognized when paid.

8. December 3: Final declaration of preferred and common dividends, based on current shares outstanding after all previous transactions.

The total dividends declared at year-end are recognized as liabilities payable to shareholders.

Calculation of Shareholders’ Equity at December 31, 2016

To prepare the updated shareholders’ equity section, account balances are adjusted by adding net income and deducting dividends. Net income for 2016 is $270,000, which increases retained earnings.

Contributions such as preferred stock issuance, common stock issuance, and treasury stock reissuance adjust the contributed capital. The stock dividend and stock split significantly change the common stock and additional paid-in capital balances.

Calculations involve incrementing common stock balances by the stock dividend and split, adjusting for treasury stock reissuance, and recognizing the effect of property dividend in bonds, which impacts other comprehensive income and net income calculations.

Conclusion

The comprehensive review of Jacobi Company's 2015 equity section, the detailed recording of transactions in 2016, and the subsequent updating of shareholders’ equity reflect the dynamic changes in company capital structure and ownership interests. Proper journal entries and an accurate closing equity statement are essential for financial transparency and stakeholder confidence. These recordings also illustrate core accounting principles such as stock issuance, dividends, stock splits, treasury stock reissuance, and property dividends.

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