EXERCISE 15­1 (a) June 15Retained Earnings (110,000 X $1).............. Dividends Payable......................... 110,000 July 10 110,000 Dec. 15 134,400 Dividends Payable................................. Cash................................................ Retained Earnings (112,000 X $1.20). . . Dividends Payable.........................

110,000

110,000

134,400

(b) In   the   retained   earnings   statement,   dividends   of   $244,400  will be deducted. In the balance sheet, Dividends Payable of  $134,400   will   be reported as a current liability. EXERCISE 15­2 (a) Total dividend declaration Allocation to preferred stock Remainder to common stock 2004 $6,000   6,000 $    0 2004 $6,000   6,000 $    0 2005 $12,000     8,000 $ 4,000 2005 $12,000   12,0001 $     0 2006 $28,000     8,000 $20,000 2006 $28,000     9,000 $19,000

(b)

Total dividend declaration Allocation to preferred stock Remainder to common stock

1

Cumulative dividend for Year 1, $3,000 + current dividend  for Year 2, $9,000. (c) Dec. 31 Retained Earnings.................................... 28,000

28,000

Dividends Payable............................

PROBLEM 15­1B (a) Feb.  1  75,000 Mar.  1  75,000 Apr.  1 Retained Earnings (75,000 X $1).......... Dividends Payable......................... Dividends Payable................................. Cash................................................ Memo—two­for­one stock split   increases number of shares to   150,000 = (75,000 X 2) and reduces   par value to $10 per share. Retained Earnings (15,000 X $13)........ Common Stock Dividends   Distributable (15,000 X $10)...... Paid­in Capital in Excess of   Par Value (15,000 X $3).............. Common Stock Dividends   Distributable....................................... Common Stock.............................. Retained Earnings (165,000 X $.50)..... Dividends Payable......................... Income Summary.................................. Retained Earnings......................... 195,000  75,000

 75,000

July  1 150,000 45,000 31 150,000 Dec.  1 82,500 31 350,000 (b)

150,000

82,500

350,000

Common Stock
Date Jan.  1 Apr.  1 July 31 Explanation Balance 2 for 1 split—new   par $10 Ref. Debit Credit


150,000

Balance 1,500,000 1,650,000

PROBLEM 15­1B (Continued) Paid­in Capital in Excess of Par Value
Date Jan.  1 July  1 Explanation Balance Ref. Debit Credit 45,000 Balance 200,000 245,000

Retained Earnings
Date Jan. Feb. July Dec.  1  1  1  1 31 Explanation Balance Cash dividend Stock dividend Cash dividend Net income Ref. Debit  75,000 195,000   82,500 Credit

350,000

Balance 600,000 525,000 330,000 247,500 597,500

Common Stock Dividends Distributable
Date July  1 31 Explanation Ref. Debit 150,000 Credit 150,000 Balance 150,000       0

(c)

ARGENTINA CORPORATION Balance Sheet (Partial) December 31, 2005

Stockholders’ equity Paid­in capital Capital stock Common stock, $10 par value, 165,000   shares issued and outstanding............... $1,650,000 Additional paid­in capital In excess of par value................................... 245,000 Total paid­in capital............................... 1,895,000

   

597,500

Retained earnings........................................................ Total stockholders’ equity....................

$2,492,500