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Identifying and Analyzing Financial Statement Effects of Dividends The stockholders equity of Palepu Company at December 31, 2015, appears below.

Common stock, $12 par value, 200,000 shares authorized;
82,000 shares issued and outstanding	$984,000
Paid-in capital in excess of par value	480,000
Retained earnings	305,000

During 2016, the following transactions occurred:

May 12	Declared and issued a 4% stock dividend; the common stock market value was $18 per share.
Dec. 31	Declared and paid a cash dividend of 75 cents per share.

a. Using the financial statement effects template, illustrate the effects of these transactions. Use negative signs with answers when appropriate. When applicable, enter total amount for contributed capital.

	Balance Sheet									Income Statement
Transaction	Cash Asset	+	Noncash Asset	=	Liabilities	+	Contrib. Capital	+	Earned Capital	Revenues	-	Expenses	=	Net Income
5/12 Declared and issued stock dividend	Answer	+	Answer	=	Answer	+	Answer	+	Answer	Answer	-	Answer	=	Answer
12/31 Declared and paid cash dividend	Answer	+	Answer	=	Answer	+	Answer	+	Answer	Answer	-	Answer	=	Answer

b. Prepare the journal entries for these transactions.

General Journal
Date	Description	Debit	Credit
5/12	Retained earnings Dec. 31, 2015	Answer	Answer
	Common Stock	Answer	Answer
	Additional paid-in capital	Answer	Answer
12/31	Retained earnings	Answer	Answer
	Cash	Answer	Answer

Post the journal entries from b to the related T-accounts.

Cash T-

Retained Earnings T-

d. Prepare a retained earnings reconciliation for 2016 assuming that the company reports 2016 net income of $283,000.

Retained earnings, December 31, 2015		answer
Add:
Net Income		answer
		answer
Less:
Cash dividends declared	answer
Stock dividends declared	answer	answer
Retained earnings, December 31, 2016		answer

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