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At the beginning of 2020, Brown Corporation had the following stockholders’ equity balances in its general...

At the beginning of 2020, Brown Corporation had the following stockholders’ equity balances in its general ledger:

Common Stock, $10 Par Value	$2,500,000
Paid-In Capital in Excess of Par: Common	1,500,000
Paid-In Capital, Treasury Stock	10,000
Paid-In Capital, Stock Options	40,000
Retained Earnings	3,000,000
Treasury Stock (10,000 shares)	(180,000)
Total Stockholders’ Equity	$6,870,000

The paid-in capital from stock options relates to options granted on 1/1/18 to the CEO as incentive compensation. As of 1/1/20, the remaining expected benefit period is four years; expense has been and will be recorded evenly over the benefit period.

The following events were among the many occurring in 2020:

January 2: Purchased 5,000 shares of its common stock for $15 per share. Brown uses the cost method of accounting for treasury stock transactions.

February 1: Declared and paid a cash dividend of $2 per share on the outstanding common stock.

April 1: Issued 20,000 shares of $50 par, noncumulative, convertible 6% preferred stock for $60 per share, where one share of preferred stock is convertible into three shares of common stock.

July 1: 2,000 shares of treasury stock that had been purchased in a prior year for $18 per share were re-issued for $10 per share.

August 1: Holders of 6,000 shares of the preferred stock converted their shares into common stock when the market value of the common stock was $22 per share. Brown uses the book value method of accounting for conversions.

October 1: Declared and distributed a 1% stock dividend on common stock outstanding when the market price of the stock was $24 per share.

November 1: Corrected an error that was made several years ago, when land that had been purchased for $60,000 was inadvertently expensed.

December 1: Declared and distributed a property dividend of land to preferred shareholders. The land had a fair value of $60,000 and a carrying value of $75,000.

December 31: Recorded 2020 compensation expense related to the stock options.

The 2020 Final Net Income, including the effects of any net income items listed above (and the 2020 tax effects on net income items), was $700,000. There were 500,000 shares authorized for both preferred and common stock.

(OVER)

Required:

All journal entries for the items (a. through i.) above. No explanations. Ignore tax effects.
The 12/31/20 Stockholders’ Equity section. Use the format from the Frost Company example in Chapter 15 of the text. Include parenthetical disclosures for preferred stock and common stock.

Expert Solution

ekkarill92 answered 9 months ago

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