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rrgg9091
03/20/2021 • Business • College

answered • expert verified

In late 2020, the Nicklaus Corporation was formed. The

corporate charter authorizes the issuance of 6,000,000 shares
of common stock carrying a $1 par value, and 2,000,000
shares of $5 par value, noncumulative, nonparticipating
preferred stock. On January 2, 2021, 4,000,000 shares of the
common stock are issued in exchange for cash at an average
price of $10 per share. Also on January 2, all 2,000,000 shares
of preferred stock are issued at $20 per share.
Required:
1. Prepare journal entries to record these transactions.
2. Prepare the shareholders' equity section of the Nicklaus balance sheet as of March
31, 2021. (Assume net income for the first quarter 2021 was $1,750,000.)

Part B
During 2021, the Nicklaus Corporation participated in three treasury stock transactions:

On June 30, 2021, the corporation reacquires 250,000 shares for the treasury at a
price of $12 per share.
On July 31, 2021, 25,000 treasury shares are reissued at $15 per share.
On September 30, 2021, 25,000 treasury shares are reissued at $10 per share.

Required:
1. Prepare journal entries to record these transactions.
2. Prepare the Nicklaus Corporation shareholders' equity section as it would appear in
a balance sheet prepared at September 30, 2021. (Assume net income for the second
and third quarter was $3,250,000.)

Part C
On October 1, 2021, Nicklaus Corporation receives permission to replace its $1 par
value common stock (6,000,000 shares authorized, 4,000,000 shares issued, and
3,800,000 shares outstanding) with a new common stock issue having a $0.50 par
value. Since the new par value is one-half the amount of the old, this represents a 2-
for-1 stock split. That is, the shareholders will receive two shares of
Askthe
your $0.50
question par stock

in exchange for each share of the $1 par stock they own. The $1 par stock will be
collected and destroyed by the issuing corporation.

On November 1, 2021, the Nicklaus Corporation declares a $0.18 per share cash
dividend on common stock and a $0.35 per share cash dividend on preferred stock.
Payment is scheduled for December 1, 2021, to shareholders of record on November
15, 2021.

On December 2, 2021, the Nicklaus Corporation declares a 1% stock dividend payable

on December 28, 2021, to shareholders of record on December 14. At the date of
declaration, the common stock was selling in the open market at $10 per share. The
dividend will result in 76,000 (0.01 Ã 7,600,000) additional shares being issued to
shareholders.

Required:
1. Prepare journal entries to record the declaration and payment of these stock and
cash dividends.
2. Prepare the December 31, 2021, shareholders' equity section of the balance sheet
for the Nicklaus Corporation. (Assume net income for the fourth quarter was
$2,750,000.)
3. Prepare a statement of shareholders' equity for Nicklaus Corporation for 2021.

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Answer:
Nicklaus Corporation
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1. Journal Entries:
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