Question

Grouper Company has the following stockholders’ equity accounts at December 31, 2017.

Common Stock ($100 par value, authorized 8,800 shares) $523,200

Retained Earnings 309,100

Prepare entries in journal form to record the following transactions, which took place during 2018. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

(1) 280 shares of outstanding stock were purchased at $97 per share. (These are to be accounted for using the cost method.)

(2) A $21 per share cash dividend was declared.

(3) The dividend declared in (2) above was paid.

(4) The treasury shares purchased in (1) above were resold at $103 per share.

(5) 480 shares of outstanding stock were purchased at $106 per share.

(6) 320 of the shares purchased in (5) above were resold at $96 per share.

Prepare the stockholders’ equity section of Grouper Company’s balance sheet after giving effect to these transactions, assuming that the net income for 2018 was $94,600. State law requires restriction of retained earnings for the amount of treasury stock.

Answer 1

Solution :

Journal entries - Grouper Company
Event	Particulars	Debit	Credit
1	Treansury Stock Dr (280*$97)	$27,160.00
	To Cash		$27,160.00
	(To record purchase of own stock)
2	Dividends Dr [(5232 - 280)*$21]	$103,992.00
	To Dividend Payable		$103,992.00
	(To record declaration of dividend)
3	Dividend Payable Dr	$103,992.00
	To Cash		$103,992.00
	(To record dividend payment)
4	Cash Dr (280*$103)	$28,840.00
	To Treasury Stock		$27,160.00
	To Additional paid in capital		$1,680.00
	(To record sale of treasury stock)
5	Treansury Stock Dr (480*$106)	$50,880.00
	To Cash		$50,880.00
	(To record purchase of own stock)
6	Cash Dr (320*$96)	$30,720.00
	Additional paid in capital Dr	$1,680.00
	Retained earnings Dr	$1,520.00
	To Treasury Stock		$33,920.00
	(To record sale of treasury stock)

Statement of Retained Earnings
For year ended December 31, 2017
Particulars	Amount
Beginning retained earnings	$309,100.00
Add: Net Income	$94,600.00
Less: Dividend paid	$103,992.00
Less: Loss from sale of treasury stock	$1,520.00
Ending retained earnings	$298,188.00
Restricted retained earnings (160*$106)	$16,960.00
Unrestricted retained earnings	$281,228.00

Grouper Company
Balance Sheet - Stockholder's Equity Section
31-Dec-18
Particulars	Amount
Stockholders Equity:
Common Stock, $100 par, 8,800 shares authorized, 5,232 shares Issued and outstanding	$523,200.00
Retained Earnings:
Restricted	$16,960.00
Unrestricted	$281,228.00
Treasury Stock (160*$106)	-$16,960.00
Total Stockholder's Equity	$804,428.00