Question

Austin Company reports the following components of stockholders’ equity on December 31, 2016:

Common stock—$10 par value, 110,000 shares authorized, 40,000 shares issued and outstanding	$	400,000
Paid-in capital in excess of par value, common stock		60,000
Retained earnings		330,000
Total stockholders' equity	$	790,000

In year 2017, the following transactions affected its stockholders’ equity accounts.

Jan.		1		Purchased 4,000 shares of its own stock at $23 cash per share.
Jan.		5		Directors declared a $2 per share cash dividend payable on February 28 to the February 5 stockholders of record.
Feb.		28		Paid the dividend declared on January 5.
July		6		Sold 1,500 of its treasury shares at $27 cash per share.
Aug.		22		Sold 2,500 of its treasury shares at $20 cash per share.
Sept.		5		Directors declared a $2 per share cash dividend payable on October 28 to the September 25 stockholders of record.
Oct.		28		Paid the dividend declared on September 5.
Dec.		31		Closed the $497,000 credit balance (from net income) in the Income Summary account to Retained Earnings.

• Requirement
• General Journal
• General Ledger
• Trial Balance
• Statement of RE
• Stockholders Equity
• Impact on Equity

General Journal tab - Prepare the necessary journal entries.

Statement of Retained Earnings tab - Prepare the Statement of Retained Earnings for the Austin Corporation for the year ended December 31, 2017.

Stockholders' Equity tab - Prepare the Stockholders' equity section of Austin Corporation's December 31, 2017 balance sheet.

Impact on Equity tab - For each transaction, indicate the total change in Stockholders' Equity, if any. Verify that total equity, as calculated, agrees with the amount reported on the Stockholders' Equity tab.

Answer 1

General Journal

Date	Particulars	Debit $	Credit $
Jan 1	Equity Share Capital A/c	92000
	To Cash A/c		92000
	Being bought - back the 4,000shares @ $23 each
Jan 5	Retained Earnings A/c	88,000
	To Dividend Payables A/c		88,000
	the dividend is due on 44,000 shares @ $ 2
Feb 28	Dividend Payable A/c	88,000
	To Retained Earnings A/c		88,000
	Dividend paid of $ 88,000 to shareholders
July 6	Cash A/c	40500
	To Treasury Shares A/c		40500
	Being 1500 treasury shares sold @ $27 each
Aug 22	Cash A/c	50,000
	To Treasury Shares A/c		50,000
	Being 2500 treasury shares sold @ $20 each
Sept 5	Retained Earnings A/c	80,000
	To Dividend Payable		80,000
	Being a dividend declared of 40,000 shares @ $2 each
Oct 28	Dividend Payable A/c	80,000
	To Retained Earnings		80,000
	Dividend paid to shareholders
Dec 31	Suspense A/c	3,35,000
	To Retained Earnings Aa/c		3,35,000
	Retained earnings account closed with $4,97,000

Cash Ledger

Particulars	Amount $	Particulars	Amount $
To Treasury Shares A/c 1500 share sold @27 each	40,500	By Share Capital 4,000 shares purchases @ 23 each	92,000
To Treasury Shares A/c 2500 shares sold @ 20 each	50,000
To Balance C/d	1500
Total	92,000	Total	92,000

Dividend Ledger

Particulars	Amount $	Particulars	Amount $
To Balance C/d	1,68,000	By Retained Earnings A/c 44,000 @ 2	88,000
		By Retained Earnings A/c 40,000 @ 2	80,000
Total	1,68,000	Total	1,68,000

Extract of Trial Balance

Particulars	L/F	Debit $	Credit $
Common stock—$10 par value, 110,000 shares authorized, 40,000 shares issued and outstanding 4,00,000 Add:- 4,000 shares @ 23 92,000 Less:-Sold 1500 @ 27 ( 40,500) Sold 2500 @ 20 (50,000)			4,01,500
Retained Earnings			4,97,000
Paid-in capital in excess of par value, common stock			60,000
Cash (Dr.)			1500

Above is just extract of Trial Balance as all other information is not given

A Statement of Retained Earnings

Particulars	Amount $	Particulars	Amount $
To Dividend paid to 44,000 shareholders	88,000	By Balance b/d	3,30,000
To Dividend paid to 40,000 shareholders	80,000	By Suspense A/c	3,35,000
To Balance C/d	4,97,000
Total	6,65,000	Total	6,65,000

Stockholders Equity

Particulars	$	Amount
Common stock—$10 par value, 110,000 shares authorized, 40,000 shares issued and outstanding 4,00,000 Add:- 4,000 shares @ 23 92,000 Less:-Sold 1500 @ 27 ( 40,500) Sold 2500 @ 20 (50,000)		4,01,500
Retained Earnings		4,97,000
Paid-in capital in excess of par value, common stock		60,000
Total stockholders' equity		9,58,500

Impact On Equity

Total NO. Of shares =

= 40,000+4000-1500-2500

= 40,000

Retained Earnings = 4,97,000

impact on equity= Retained Equity/No. of outstanding shares

= 4,97,000/40,000

= $12.425