On April 21, Killarny Enterprises acquired a large tract of land from McSwain Corporation. Killarny issued 1,400 shares of its $1 par value common stock to McSwain in exchange for the land.
(a) Prepare the journal entry to record this transaction by Killarny Enterprises, if the company’s stock is not publicly traded and the land has an appraised value of $110,000.
(b) Assume that on April 20, the Killarny stock traded on the New York Stock Exchange for $75 per share. The land has an appraised value of $110,000. Prepare the appropriate journal entry to record this exchange transaction by Killarny Enterprises.
(c) Suppose, instead, that Killarny sold 1,400 shares of stock on April 20 for $80 cash per share. The company then acquired the land from McSwain Corporation on April 21 for its appraised value. Prepare the journal entries for these two transactions by Killarny Enterprises.
(d) Determine the differences between the financial statement results in parts (a), (b), and (c). Explain why these differences occured.
Accounting for Cash Dividends
Lupinski Distributors has 1,000,000 shares of common stock outstanding. On January 11 of the current year, Lupinski declared a cash dividend of $0.20 per share, payable on March 9 to stockholders of record on February 12.
(a) When did this dividend become a liability to Lupinski?
(b) Prepare any journal entries required in Lupinski’s accounting records relating to this cash dividend on the following dates in the current year:
(1) January 11
(2) February 12
(3) March 9
(4) December 31
(c) What group of individuals authorized the declaration of this dividend?
(d) What general types of information must public companies regulated by the SEC disclose in their annual reports regarding their dividend policies? Why is this information important to potential investors?
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