Reporting Stockholders’ Equity
The Stockholders’ Equity section of Nilsson Corporation’s balance sheet as of December 31, 2007, is as follows:
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Common stock ($5 par, 500,000 shares authorized, |
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275,000 issued and outstanding) |
$1,375,000 |
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Paid in capital pital in excess of par |
550,000 |
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Total paid in capital |
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$1,925,000 |
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Unappropriated retained earnings |
$1,335,000 |
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Appropriated retained earnings |
500,000 |
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Total retained earnings |
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1,835,000 |
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Total stockholders’ equity |
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$3,760,000 |
Nilsson Corporation had the following stockholders’ equity transactions during 2008:
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, 2008, to stockholders of record on June 30, 2008.
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, 2008, to stockholders of record on
November 30, 2008. 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, 2008, 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, 2008, Stockholders’ Equity section of the balance sheet for Nilsson.