Question

Alexander Corporation reports the following components of stockholders’ equity on December 31, 2016: Common stock—$25 par value, 50,000 shares authorized, 33,000 shares issued and outstanding $ 825,000 Paid-in capital in excess of par value, common stock 66,000 Retained earnings 350,000 Total stockholders’ equity $ 1,241,000 In year 2017, the following transactions affected its stockholders’ equity accounts. Jan. 2 Purchased 3,300 shares of its own stock at $25 cash per share. Jan. 7 Directors declared a $1.50 per share cash dividend payable on February 28 to the February 9 stockholders of record. Feb. 28 Paid the dividend declared on January 7. July 9 Sold 1,320 of its treasury shares at $30 cash per share. Aug. 27 Sold 1,650 of its treasury shares at $20 cash per share. Sept. 9 Directors declared a $2 per share cash dividend payable on October 22 to the September 23 stockholders of record. Oct. 22 Paid the dividend declared on September 9. Dec. 31 Closed the $55,000 credit balance (from net income) in the Income Summary account to Retained Earnings.

Required: 1. Prepare journal entries to record each of these transactions for 2017. 2. Prepare a statement of retained earnings for the year ended December 31, 2017. 3. Prepare the stockholders’ equity section of the company’s balance sheet as of December 31, 2017.

Answer 1

Date	Account Titles and Explanations	Debit ($)	Credit ($)
Jan-02	Treasury stock (3300*$25)	82500
	Cash		82500
	(To record the purchase of treasury stock)
Jan-07	Retained earnings [(33,000-3,300)*$1.50]	44550
	Cash dividend payable		44550
	(To record the dividends declared)
Feb-28	Cash dividend payable	44550
	Cash		44550
	(To record the payment of dividends)
Jul-09	Cash (1320*$30)	39600
	Treasury stock (1320*$25)		33000
	Paid in capital in excess-treasury stock (39600-33000)		6600
	(To record the re-issuance of treasury stock)
Aug-27	Cash (1650*$20)	33000
	Paid in capital in excess-treasury stock	6600
	Retained earnings	1650
	Treasury stock (1650*$25)		41250
	(To record the re-issuance of treasury stock)
Sep-09	Retained earnings [(33,000-3,300+1320+1650)*$2]	65340
	Cash dividend payable		65340
	(To record the dividends declared)
Oct-22	Cash dividend payable	65340
	Cash		65340
	(To record the payment of dividends)
Dec-31	Income summary	55000
	Retained earnings		55000
	(To close the income summary account)

ALEXANDER CORPORATION
Statement of Retained Earnings
For Year Ended December 31, 2017
Retained earnings, December 31, 2016	3,50,000
Add: Net income	55,000
	4,05,000
Less: Cash dividends declared (44550+65340)	109890
Less: Treasury stock re-issuance	1650
Retained earnings, December 31, 2017	2,93,460

ALEXANDER CORPORATION
Stockholders’ Equity Section of the Balance Sheet
December 31, 2017
Common stock - $25 par value	825000
Paid-in capital in excess of par value, common stock	66000
Retained earnings	2,93,460
Less: Cost of treasury stock (82500-33000-41250)	8250
Total stockholders’ equity	11,76,210