GM5183 presentation.pdf

Journal entry to record the issuance of the bonds

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Journal entry to record the issuance of the bonds Journal entry to record the accrual of interest on December 31, 2017 Journal entry to record the payment of interest on January 1, 2018 Journal entry to record the redemption of the bonds at maturity, assuming interest for the last interest period has been paid and recorded. Ivanhoe Company issued $430,000 of 10%, 15-year bonds on January 1, 2017, at face value. Interest is payable annually on January 1.
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Retained Earnings Retained Earnings have a credit balance. Payouts for stock dividends will result in a debit to retained earnings. Net losses will result in a debit to retained earnings. Any increase to net income will increase the balance of retained earnings and be a credit.
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Stockholder Equity Balance sheet consists of common stock $546,000 and retained earnings $401,000 Options: Declare a 5% stock dividend; 91,000 shares with $6 par value Stock split 2-for-1 reduced $3 par value per share
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Stock Entries Preferred Stock $164,000 Paid-in Capital in Excess of Par Value Preferred Stock 22,400 Common Stock 2,030,000 Paid-in Capital in Excess of Stated Value Common Stock 1,650,000 Treasury Stock (5,400 common shares) 70,200 Retained Earnings 83,700 Accumulated Other Comprehensive Income 50,400
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Balance Sheet
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The board of directors is considering a stock split or a stock dividend. They understand that total stockholders’ equity will remain the same under either action. However, they are not sure of the different effects of the two actions on other aspects of stockholders’ equity. Explain the differences to the directors. Stock split is the splitting of current par value of common stock to a reduced par value. There is no effect on total paid in capital or retained earnings, or total par value. Stock dividend results in the reduction of retained earnings.
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  • Fall '13
  • Generally Accepted Accounting Principles

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