## Step-by-Step Solution ### **Given Summary** Branch Corporation has had several transactions affecting shareholders’ equity for 2022–2025. The transactions mentioned are: 1. **Cash Dividend Declaration (Nov 1, 2022):** - $.80 per share on common shares. - Payable on January 10, 2023, to shareholders of record on December 15, 2022. 2. **Property Dividend Declaration (March 3, 2023):** - Dividend payable in shares of Western Corporation (book value $8 million, fair value $11 million). - Distribution date: March 31, 2023. 3. **Stock Dividend Declaration (June 1,2024):** - 3-for-2 stock split (not a dividend). - 5% stock dividend declared on 3-for-2 adjusted shares. - Market price per share: $36. 4. **Cash Dividend Declaration (Nov 1, 2025):** - $.90 per share on common shares. - Payable January 10, 2026, to shareholders of record December 15, 2025. --- ## **Required:** 1. **Prepare journal entries for the three items:** - Cash dividend (Nov 1, 2022) - Property dividend (March 3, 2023) - Stock dividend (June 1, 2024) 2. **Prepare a schedule of shareholders’ equity balances (2022–2025).** --- # 1. **Journal Entries** ## **A. Cash Dividend (Nov 1, 2022)** - Shares outstanding: 125 million - Dividend per share: $.80 **Total dividend:** $.80 × 125 million = $100 million **Nov 1, 2022: Declaration** ``` Retained Earnings ............. 100 million Dividends Payable .................... 100 million ``` **Jan 10, 2023: Payment** ``` Dividends Payable ............ 100 million Cash .......................................... 100 million ``` --- ## **B. Property Dividend (March 3, 2023)** - Book value of investment: $8 million - Fair value: $11 million **Step 1: Restate asset to fair value (recognize gain)** ``` Investment in Western Corp ......... 3 million Gain on Appreciation of Investments .......... 3 million ``` **Step 2: Declare property dividend (at fair value)** ``` Retained Earnings ............. 11 million Property Dividends Payable ........... 11 million ``` **March 31, 2023: Distribute property dividend** ``` Property Dividends Payable ... 11 million Investment in Western Corp ............ 11 million ``` --- ## **C. Stock Dividend (June 1, 2024)** - 5% stock dividend on adjusted shares after 3-for-2 split. - Shares before split: 125 million - After split: 125 million × 3/2 = 187.5 million shares - Shares for dividend: 187.5 million × 5% = 9.375 million - Market price per share: $36 **June 1, 2024: Declaration** ``` Retained Earnings ............. 337.5 million [9.375 million × $36] Common Stock Dividend Distributable ....... 9.375 million (par) Paid-in Capital in Excess of Par .......... 328.125 million ``` **When issued:** ``` Common Stock Dividend Distributable ... 9.375 million Common Stock ............................... 9.375 million ``` --- # 2. **Shareholders' Equity Schedule (2022–2025)** | Year-end | Common Stock | Paid-in Capital | Retained Earnings | Total Equity | |----------|--------------|-----------------|-------------------|--------------| |2021 | $125M | $2,675M | $220M | $3,020M | |2022 | $125M | $2,675M | $120M* | $2,920M | |2023 | $125M | $2,675M | $195M** | $2,995M | |2024 | $134.375M*** | $3,003.125M*** | $455M**** | $3,592.5M | |2025 | $134.375M | $3,003.125M | $365.5M***** | $3,502.5M | --- **Notes:** - *2022: Retained Earnings = $220M + Net Income ($100M) – Dividend ($100M) - **2023: Retained Earnings = $120M + Net Income ($195M) – Property Dividend ($11M) - ***2024: After 3-for-2 split and 5% stock dividend - ****2024: Retained Earnings = $195M + Net Income ($305M) – Stock Dividend ($337.5M) - *****2025: Retained Earnings = $455M + Net Income ($359M) – Dividend ($90M) --- ## **Final Summary** - **Journal entries** were prepared for cash, property, and stock dividends. - **Shareholders’ equity schedule** was prepared, showing the effect of each transaction and annual net income. - Each transaction reduces retained earnings and, in the case of the stock dividend, increases common stock and paid-in capital. - The equity schedule tracks all changes from 2022 to 2025 as required. --- **If you need the journal entries in a specific format or for a particular year, please specify!**