Question

At December 31, the end of Chilton Communication’s third quarter, the following stockholders’ equity accounts are reported:

Common stock, \(10 par value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . \) 960,000

Paid-in capital in excess of par value, common stock . . . . . . . . . . . . . . . 384,000

Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,600,000

In the fourth quarter, the following entries related to its equity are recorded

	Account and explanation	Debit	Credit
Jan. 17	Retained Earnings Common Dividend Payable	96,000	96,000
Feb. 5	Common Dividend Payable Cash	96,000	96,000
Feb. 28	Retained Earnings Common Stock Dividend Distributable Paid-In Capital in Excess of Par Value, Common Stock.	252,000	120,000 132,000
Mar. 14	Common Stock Dividend Distributable Common Stock, \(10 Par Value.	120,000	120,000
Mar.25	Memo—Change the title of the Common Stock account to reflect the new par value of \)5
Mar. 31	Income Summary Retained Earnings	720,000	720,000

Required

1. Explain the transaction(s) underlying each journal entry.

2. Complete the following table showing the equity account balances at each indicated date (take into account the beginning balances from December 31).

	Dec 31	Jan.17	Feb.5	Feb.28	Mar.14	Mar.25	Mar.31
Common stock	\( 960,000
Common stock dividend distributable	0
Paid-in capital in excess of par, common stock	384,000
Retained earnings	1600,000
Total equity	\)2,944,000

Short answer

The total equity balance as of March 31 is $3,568,000.

Step-by-step solution

Meaning of Retained Earnings

Retained earnings refer to the profits of a company, which can be used for further reinvestment or it could also refer to the remaining portion of a company's profit after paying all the costs.

Explaining the transactions

Jan.17: Directors declared a $1 per share cash dividend payable on Feb 05.

Feb.5: Paid the declared dividend.

Feb 28: Declared a small stock dividend of 12.5% (i.e., 12,000 shares); Market value of $ 21 Per Share.

Mar.14: Distributed 12,000 shares of common stock.

Mar.25: The Company issued a 1-for-1 stock split.

Mar.31: Closed the $720,000 credit balance (from net income) in the Income Summary account to Retained Earnings.

Equity table (Amount in $ 000’)

	Dec 31	Jan.17	Feb.5	Feb.28	Mar.14	Mar.25	Mar.31
Common stock	960	960	960	960	1080	1080	1080
Common stock dividend distributable	0	0	0	120	-	-	-
Paid-in capital in excess of par, common stock	384	384	384	516	516	516	516
Retained earnings	1600	1,504	1,504	1,252	1,252	1,252	1972
Total equity	2,944	2,848	2,848	2,848	2,848	2,848	3,568