Question

Question:

At September 30, the end of Beijing Company’s third quarter, the following stockholders’ equity accounts are reported.

Common stock, \(12 par value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . \)360,000

Paid-in capital in excess of par value, common stock . . . . . . . . . . . . . . . 90,000

Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 320,000

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

	Account and explanation	Debit	Credit
Oct.2	Retained Earnings Common Dividend Payable	60,000	60,000
Oct.25	Common Dividend Payable Cash	60,000	60,000
Oct.31	Retained Earnings Common Stock Dividend Distributable Paid-In Capital in Excess of Par Value, Common Stock.	75,000	36,000 39,000
Nov.5	Common Stock Dividend Distributable Common Stock, \(10 Par Value.	36,000	36,000
Dec.1	Memo—Change the title of the Common Stock account to reflect the new par value of \)4
Dec.31	Income Summary Retained Earnings	210,000	210,000

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 September 30).

	Sep .30	Oct.2	Oct.25	Oct.31	Nov.5	Dec.1	Dec.31
Common stock	\( 360,000
Common stock dividend distributable	0
Paid-in capital in excess of par, common stock	90,000
Retained earnings	320,000
Total equity	\)770,000

Short answer

Answer

1. Given below
2. Given below

Step-by-step solution

Explain the transaction

Oct.2: Directors declared a $2 per share cash dividend payable on oct. 25.

Oct.25: Paid the declared dividend of $60,000.

Oct.31: Declared a small stock dividend of 10% i.e., 3,000 shares; Market value of $ 25 Per Share, par value of which is $12.

Nov.5: Distributed 3,000 shares of common stock.

Dec.1: The company issued 1-for-2 stock split.

Dec.31: Closed the $210,000 credit balance (from net income) in the Income Summary account to Retained Earnings.

Equity table

	Sep .30	Oct.2	Oct.25	Oct.31	Nov.5	Dec.1	Dec.31
Common stock	$360,000	$360,000	$360,000	$360,000	$ 396,000	$ 396,000	$ 396,000
Common stock dividend distributable	0	0	0	36,000	-	-	-
Paid-in capital in excess of par, common stock	90,000	90,000	90,000	129,000 ($90,000+$39,000)	129,000	129,000	129,000
Retained earnings	320,000	260,000 ($320,000-$60,000)	260,000	185,000 ($260,000-$75,000)	185,000	185,000	395,000 ($185,000+$210,000)
Total equity	$770,000	$ 710,000	$710,000	$710,000	$ 710,000	$ 710,000	$ 920,000