Selected Transactions Completed By Canyon Ferry Boating Corp
Selected Transactions Completed By Canyon Ferry Boating Corporation Du
Selected transactions completed by Canyon Ferry Boating Corporation during the current fiscal year are detailed as follows: January 8 marked the stock split, reducing the par value from $80 to $40 per share, resulting in 150,000 shares outstanding. On April 30, the company declared semiannual dividends of $0.75 on 18,000 preferred shares and $0.28 on common stock, payable on July 1. July 1 saw the payment of these dividends. On October 31, the company declared semiannual dividends of $0.75 on preferred stock and $0.14 on common stock, along with a 5% stock dividend on common shares, with the fair market value at approximately $52 per share. December 31 involved the payment of cash dividends and issuance of stock certificates for the declared stock dividend.
Paper For Above instruction
The following paper provides journal entries for the selected transactions completed by Canyon Ferry Boating Corporation during the fiscal year, including stock split, dividends declaration and payment, and stock dividend issuance. Each step is explained with relevant accounting principles and illustrative journal entries.
1. Stock Split - January 8
On January 8, Canyon Ferry Boating Corporation executed a stock split, reducing the par value from $80 to $40 per share. Since a stock split increases the number of shares outstanding proportionally without altering the total equity, no journal entry records the split itself. Instead, the effect is reflected by adjusting the par value per share and the number of shares outstanding. After the split, the number of shares rose, and the par value decreased, but total common stock equity remained unchanged.
However, the journal entry to reflect the adjustment in the stock records involves a memorandum entry or a note in the financial statement disclosures, since stock splits are non-cash, non-revenue, and non-expense transactions.
No journal entry is necessary for the stock split itself; the change is recorded in the notes to financial statements and stock ledger. The share count increases accordingly, with the reduction in the par value per share noted.
2. Declaration of Dividends - April 30
On April 30, the company declared semiannual dividends on preferred and common stock. For preferred stock, a dividend of $0.75 per share on 18,000 shares results in a total of:
- $0.75 × 18,000 = $13,500
For common stock, a dividend of $0.28 per share with unknown total shares outstanding (implying the previous 150,000 shares post-split) results in:
- $0.28 × 150,000 = $42,000
The journal entry on April 30 records the declaration of these dividends:
Date: April 30
Debit: Dividends (or Dividends Declared) — Preferred $13,500
Debit: Dividends (or Dividends Declared) — Common $42,000
Credit: Dividends Payable — Preferred $13,500
Credit: Dividends Payable — Common $42,000
This entry recognizes the company's obligation to pay dividends on both preferred and common shares.
3. Payment of Dividends - July 1
On July 1, the dividends declared are paid. The journal entry involves debiting the payable accounts and crediting cash:
Date: July 1
Debit: Dividends Payable — Preferred $13,500
Debit: Dividends Payable — Common $42,000
Credit: Cash $55,500
This action settles the company's dividend obligations.
4. Declaration of Dividends and Stock Dividend - October 31
On October 31, a declaration of semiannual dividends on preferred and common stock, along with a 5% stock dividend, takes place. Calculating the dividends:
- Preferred: $0.75 × 18,000 = $13,500
- Common: $0.14 × 150,000 = $21,000
The 5% stock dividend involves issuing additional shares equal to 5% of the existing 150,000 shares:
- Additional shares = 150,000 × 5% = 7,500 shares
With a fair market value of $52 per share, the total value of the stock dividend is:
7,500 shares × $52 = $390,000
This stock dividend is accounted for at market value, and a transfer is made from retained earnings to common stock and paid-in capital accounts based on the par value and excess of market over par.
The journal entries include the declaration of dividends and issuance of stock dividends:
Declaration of Dividends
Date: October 31
Debit: Dividends (or Dividends Declared) — Preferred $13,500
Debit: Dividends (or Dividends Declared) — Common $21,000
Credit: Dividends Payable — Preferred $13,500
Credit: Dividends Payable — Common $21,000
Issuance of Stock Dividend
Date: October 31
Debit: Retained Earnings $390,000
Credit: Common Stock (par value) (7,500 × $40)
Credit: Paid-in Capital in Excess of Par (difference)
Assuming a $40 par value and market value at $52, the excess over par per share is $12. The journal entry reflects the issuance of stock dividend at market value, applying the appropriate split between common stock and additional paid-in capital.
5. Payment of Dividends and Issuance of Stock Certificates - December 31
On December 31, the company makes the cash payment for declared dividends and issues stock certificates for the stock dividend. The cash payment is recorded as:
Date: December 31
Debit: Dividends Payable — Preferred $13,500
Debit: Dividends Payable — Common $21,000
Credit: Cash $34,500
The stock certificates are issued based on the earlier declaration, with updated stock ledger reflecting the increased number of shares outstanding.
Conclusion
These transactions demonstrate key accounting treatments for stock splits, dividend declarations and payments, and stock dividends. Proper recording ensures transparency and accuracy in financial reporting, conforming to GAAP principles. The journal entries provided comply with standard practices and reflect the economic events of the company accurately.
References
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