Question

Entries for Selected Corporate Transactions Morrow Enterprises Inc. manufactures bathroom fixtures. Morrow Enterprises’ stockholders’ equity accounts, with balances on January 1, 20Y6, are as follows: Common Stock, $10 stated value (900,000 shares authorized, 600,000 shares issued) $6,000,000 Paid-In Capital in Excess of Stated Value-Common Stock 1,150,000 Retained Earnings 13,620,000 Treasury Stock (60,000 shares, at cost) 840,000 The following selected transactions occurred during the year: Jan. 22. Paid cash dividends of $0.14 per share on the common stock. The dividend had been properly recorded when declared on December 1 of the preceding fiscal year for $75,600. Apr. 10. Issued 115,000 shares of common stock for $2,070,000. June 6. Sold all of the treasury stock for $17 per share. July 5. Declared a 4% Stock dividend on common stock, to be capitalized at the market price of the stock, which is $20 per share. Aug. 15. Issued shares of stock for the stock dividend declared on July 5. Nov. 23. Purchased 38,000 shares of treasury stock for $19 per share. Dec. 28. Declared a $0.17-per-share dividend on common stock. 31. Closed the credit balance of the income summary account, $14,165,000. 31. Closed the two dividends accounts to Retained Earnings. Required: 1. The January 1 balances have been entered in T accounts for the stockholders' equity accounts. Record the above transactions in the T accounts and provide the December 31 balance where appropriate. If required, round to one decimal place. 2. Journalize the entries to record the transactions. For a compound transaction, if an amount box does not require an entry, leave it blank. Jan. 22. Paid cash dividends of $0.14 per share on the common stock. The dividend had been properly recorded when declared on December 1 of the preceding fiscal year for $75,600. 3. Prepare a retained earnings statement for the year ended December 31, 20Y6. 4. Prepare the Stockholders' Equity section of the December 31, 20Y6, balance sheet.

Answer 1

Common Stock
			1-Jan	Bal	$6,000,000
			10-Apr		$1,150,000
			15-Aug		286000
			31-Dec	Bal	$7,436,000
Paid in Capital in Excess of Stated Value - Common Stock
			1-Jan	Bal	$1,150,000
			10-Apr		$920,000
			5-Jul		286000
			31-Dec	Bal	$2,356,000
Retained Earnings
31-Dec		863526.2	1-Jan	Bal	13620000
			31-Dec		$14,165,000
			31-Dec	Bal	$26,921,474
Treasury Stock
1-Jan	Bal	840000	6-Jun		840000
23-Nov		$722,000
31-Dec	Bal	$722,000
Paid in Capital from Sale of Treasury stock
			6-Jun		180000
Stock Dividends Distributed
15-Aug		286000	5-Jul		286000
Stock Dividends
5-Jul		572000	31-Dec	Retained Earnings	572000
		572000			572000
Cash Dividends
28-Dec		$291,526.20	31-Dec	Retained Earnings	$291,526.20
		$291,526.20			$291,526.20

Date	Journal Entries	Debit	Credit
22-Jan	Cash Dividends Payable(600000-60000)*0.14	75600
	To Cash		75600
10-Apr	Cash	$2,070,000
	To Common Stock (115000*10)		1150000
	To Paid in capital Excess of stated Value - common stock		$920,000
6-Jun	Cash	1020000
	To Treasury Stock		$840,000
	To Paid In capital from sale of Treasury stock		$180,000
5-Jul	Stock Dividends (600000+115000)*4%*20	572000
	To Stock dividends Distributable		286000
	To Paid in capital in Excess of stated value common stock		286000
15-Aug	Stock Dvidends Distributable	286000
	To Common Stock		286000
23-Nov	Treasury Stock	722000
	To Cash		722000
28-Dec	Cash Dividends (600000+1150000+2860-38000)*0.17	291526.20
	To Cash Dividends Payable		291526.2
31-Dec	Income Summary	$14,165,000
	To Retained Earnings		$14,165,000
31-Dec	Retained Earnings	863526.2
	To Stock Dividends		572000
	To Cash Dividends		291526.2

MORROW ENTERPRISES INC
RETAINED EARNINGS
FOR THE YEAR ENDED DECEMBER 31
Retained Earnings, Jan 1			13620000
Net Income		$14,165,000
Less : Cash Dividends		291526.2
Stock Dividends		572000
Increase in Retained Earnings			$13,301,474
Retained Earnings, Dec 31			$26,921,474
Stockholders Equity
Paid in Capital
Common Stock, $ 10 stated value ( 900000 shares authorised,   743600 shares issued)		$7,436,000
Excess of issue price over stated price		$2,356,000
From Sale of treasury stock		180000
Total Paid in Capital			$9,972,000
Retained Earnings			$26,921,474
Total			$36,893,474
Deduct : Treasury stock			$722,000
Total stockholders equity			$36,171,474