Listed below are the transactions that affected the shareholders’ equity of Branch-Rickie Corporation during the period 2016–2018. At December 31, 2015, the corporation’s accounts included:
($ in 000s)
Common stock, 120 million shares at $1 par $ 120,000
Paid-in capital—excess of par 720,000
Retained earnings 990,000
a. November 1, 2016, the board of directors declared a cash dividend of $0.80 per share on its common shares, payable to shareholders of record November 15, to be paid December 1.
b. On March 1, 2017, the board of directors declared a property dividend consisting of corporate bonds of Warner Corporation that Branch-Rickie was holding as an investment. The bonds had a fair value of $3.6 million, but were purchased two years previously for $3.2 million. Because they were intended to be held to maturity, the bonds had not been previously written up. The property dividend was payable to shareholders of record March 13, to be distributed April 5.
c. On July 12, 2017, the corporation declared and distributed a 4% common stock dividend (when the market value of the common stock was $19 per share). Cash was paid in lieu of fractional shares representing 800,000 equivalent whole shares.
d. On November 1, 2017, the board of directors declared a cash dividend of $0.80 per share on its common shares, payable to shareholders of record November 15, to be paid December 1.
e. On January 15, 2018, the board of directors declared and distributed a 3-for-2 stock split effected in the form of a 50% stock dividend when the market value of the common stock was $20 per share.
f. On November 1, 2018, the board of directors declared a cash dividend of $0.65 per share on its common shares, payable to shareholders of record November 15, to be paid December 1.
Required:
1. Prepare the journal entries that Branch-Rickie recorded during the three-year period for these transactions. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in whole dollars.)
2. Prepare comparative statements of shareholders’ equity for Branch-Rickie for the three-year period. Net income was $430 million, $495 million, and $555 million for 2016, 2017, and 2018, respectively. (Negative amounts should be indicated by a minus sign. Enter your answers in thousands (000's).)
ReferenceseBook & Resources
General JournalLearning Objective: 18-06 Describe retained earnings and distinguish it from paid-in capital.Learning Objective: 18-08 Explain stock dividends and stock splits and how we account for them.
Difficulty: 3 HardLearning Objective: 18-07 Explain the basis of corporate dividends, including the similarities and differences between cash and property dividends.