The TMI Corporation has been in operation for over 30 years and,at December 31, 2017, it had:
• 10,000 shares of $300 par-value common stock authorized, ofwhich 4,000 shares had been issued, and
• 10,000 shares authorized, issued, and outstanding of $20stated-value preferred stock, that pays a dividend of 4%.
On January 2, 2018, TMI’s Board of Directors declared and issueda 3-for-1 common stock split. Then, on September 1, 2018, TMI’sBoard declared (i) a 20% (small) common stock dividend to holdersof record on October 1, to be distributed on November 1, and (ii)the preferred stock dividend.
The company’s accounts also showed the following balances onAugust 31, 2018, before the declaration of the dividends:Additional contributed capital . . . . . . . . . . . . . . . . . .. . . . . . $ 90,000
Retained earnings (includes all net income earned through August31) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .600,000
When distributed in November, the stock dividend included 6,000fractional share rights, representing 600 potential shares. OnDecember 15, 90% of the rights were exercised; the remaining rightswill not be exercised until 2019.
On December 20, 2018, TMI acquired 2,000 shares of its owncommon stock at the current market value.
On December 30, 2018, TMI established a $206,000 sinking fund,with an equivalent reserve in stockholders’ equity.
The company had additional net income of $114,000 for the periodSeptember 1 through December 31, 2018.
After the stock split, the market value of TMI’s common stockthroughout 2018 was $96 per share. Using the information above,prepare a statement of stockholders’ equity of The TMI Corporationat December 31, 2018, providing full disclosure.
In order to provide the necessary disclosures in the statementof stockholders’ equity, it will be necessary to consider theinformation relating to the stock split and the stock dividend.However, do not provide any supporting journal entries for thosetransactions.
