Exercise 1

1-Apr Cash 425,000

OSC 125,000
Share premium 300,000

15-Jun Retained earnings 120,000

Cash dividend payable 120,000

10-Jul Cash dividends payable 120,000

Cash 120,000

1-Dec Cash 38,000

OSC 10,000
Share premium 28,000

15-Dec Retained earnings 146,400

Cash dividend 146,400

Total Dividends (120,000)

Dividends payable (175,680)
Exercise 2
A 10-Dec R/E 378,000
Share distributable 210,000
Share premium 168,000

Share distributable 210,000

OSC 210,000

B 10-Dec R/E 720,000

Share distributable 180,000
Share premium 540,000

Share distributable 180,000

OSC 180,000
 No.of outstanding stock 15% stock dividend
1-Jan 100,000
1-Jul 40,000
Total outstanding stock 140,000 21,000

No.of outstanding stock 15% stock dividend

1-Jan 200,000
1-Jul 40,000
Total outstanding stock 240,000 36,000
Exercise 3

Before Action After Stock Dividend After stock split

Ordinary share capital 500,000 525,000 500,000
Retained Earnings 900,000 865,000 900,000
Share premium-OSC 10,000
Number of shares 50,000 50,000 100,000
Par value per share 10 10 5
 No.of outstanding stock 5% stock dividend
31-Oct 50,000
Total outstanding stock 50,000 2,500
Exercise 4

Beginning R/E 650,000

Inventory error (40,000)
Adjusted beginning R/E 610,000
Net income 350,000
Cash dividends (120,000)
Stock dividends (90,000) (210,000)
R/E Dec 31,2017 750,000
 Exercise 5
OSC 500,000 Dirk Company
SPOSC 100,000 Partial Statement of Shareholder's Equity
R/E 250,000 Capital share
OSC 500,000
1-Jan Cash 200,000 PSC 125,000
PSC 125,000 Share Premium
SPPSC 75,000 Share premium -OSC 100,000
Share premium -PSC 75,000
2-Jan Cash 40,000 Total Capital Share
R/E
TS 40,000 Net Income
Less: Dividends (56,000)
Less: TS (40,000)
Total Shareholder's Equity
older's Equity

625,000

175,000
800,000
250,000 374,000
180,000

(96,000)
1,134,000
 Amount Par value
C-PSC 50,000 20
OSC 200,000 5

Trev 2,000,000
Expenses 1,300,000
Income tax 30%

Net income 700,000

N/I after tax 490,000
PSC 60,000
N/I after dividends to PSC 430,000
Average OSC 200,000
Earnings per share 2.15
 2017 2016
Average common stockholders’ equity 1,800,000 1,900,000 
Dividends paid to common stockholders 90,000 70,000
Dividends paid to preferred stockholders 20,000 20,000
Net income 200,000 191,000
Market price of common stock 20 25

Earnings per share

2017
N/I 200,000
PSC 20,000
Average OSC 150,000
Earnings per share 1.20 ni-div for pref

2016
N/I 191,000
PSC 20,000
Average OSC 180,000
Earnings per share 0.95
 Karp Company
Journal Entries 2017
Date Transactions DR CR
1-Jul Retained earnings 96,000
Cash dividends payable 96,000

1-Aug RE 25,000
Accumuated Dep. 25,000

1-Sep Cash dividends payable 96,000

 Cash 96,000

1-Dec Retained earnings 432,000

Stock dividends distributable 120,000
Share premium - OSC 312,000

15-Dec Retained earnings 36,000

Cash dividends payable 36,000

31-Dec Income summary 355,000

Retained earnings 355,000

Retained earnings 200,000

Retained earnings,
appropriation plant expansion 200,000
General Ledger: Shareholder's Equity
Retained Earnings
Date Explanation Ref DR CR Balance
1-Jan Balance ✓ 800,000
1-Aug Depreciation expense J 25,000
1-Sep Cash dividends (OSC) J 96,000
1-Dec Stock dividends (OSC) 432,000
15-Dec Cash dividends (PSC) J 36,000 211,000
31-Dec Net income 355,000 566,000

Ordinary share capital

Date Explanation Ref DR CR Balance
1-Jan Balance ✓ 800,000
1-Dec Stock dividends distributable J 120,000 920,000

Preference share capital

Date Explanation Ref DR CR Balance
1-Jan Balance ✓ 600,000

Share Premium - Ordinary share capital

Date Explanation Ref DR CR Balance
1-Jan Balance ✓ 300,000
1-Dec Share premium J 312,000 612,000

Share Premium - Preference share capital

Date Explanation Ref DR CR Balance
1-Jan Balance ✓ 200,000
 Karp Company
Statement of Retained Earnings
For the year ended December 31, 2017
Retained Earnings, Jan 1, as reported 800,000
Correction for understatement of depreciation in prior period (25,000)
Retained Earnings, Jan 1, as adjusted 775,000
Add: Net income 355,000
Less: OSC dividends 528,000
PSC dividends 36,000 (564,000)
Total Retained Earnings, Dec 31, 2017 566,000
 Karp Company
Partial Balance Sheet
December 31, 2017
Shareholder's Equity
Share Capital
Ordinary share capital, P5 par 920,000
Preference share capital, 6%, P50 par 600,000
Total Share Capital 1,520,000
Share Premium
Share Premium - Ordinary share capital 612,000
Share Premium - Preference share capital 200,000
Total Share Premium 812,000
Retained Earnings 566,000

Total Shareholder's Equity, December 31, 2017 2,898,000