Question

Alexander Corporation reports the following components of stockholders’ equity on December 31, 2016:

Common stock—$25 par value, 70,000 shares authorized, 46,000 shares issued and outstanding	$	1,150,000
Paid-in capital in excess of par value, common stock		92,000
Retained earnings		396,000
Total stockholders’ equity	$	1,638,000

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

Jan.		2		Purchased 4,600 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 1,840 of its treasury shares at $30 cash per share.
Aug.		27		Sold 2,300 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 $68,000 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.

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Answer 1

Solution:

Requirement:1

Date	Description	Debit	Credit
Jan. 2	Treasury Stock	$       115,000
	Cash		$        115,000
	(To record Treasury Stock purchased)
Jan. 7	Cash Dividend	$         62,100
	Dividend Payable-Common Stock		$           62,100
	( To record dividend declared)
Feb. 28	Dividend Payable-Common Stock	$         62,100
	Cash		$           62,100
	( To record dividend paid)
July. 9	Cash	$         55,200
	Treasury Stock		$           46,000
	Paid-In Capital in excess - Treasury Stock		$             9,200
	(To record treasury stock resold)
Aug. 27	Cash	$         46,000
	Paid-In Capital in excess - Treasury Stock	$           9,200
	Retained Earning	$           2,300
	Treasury Stock		$           57,500
	(To record treasury stock resold)
Sept. 9	Cash Dividend [(46000-4600+1840+2300)*2]	$         91,080
	Dividend Payable-Common Stock		$           91,080
	( To record dividend declared)
Oct. 22	Dividend Payable-Common Stock	$         91,080
	Cash		$           91,080
	( To record dividend paid)
Dec. 31	Income Summary/Net Income	$         68,000
	Retained Earnings		$           68,000
	( To close income summary account)

Requirement:2

Alexander Corporation
Retained Earnings Statement
For the Year Ended December.31, 2017
Beginning Balance	$         396,000
Add:Net Income	$            68,000
Less:
Dividends (Cash Dividend) [62100+91080]	$       (153,180)
Treasury Stock	$            (2,300)
Retained Earnings Closing Balance	$         308,520

Requirement:3

Alexander Corporation
[Stockholders` Equity Section]
For the Year Ended December.31, 2017
Stockholder's equity :
Common Stock	$      1,150,000
Paid-in capital in excess of par-common stock	$            92,000
Total paid in capital	$      1,242,000
Retained Earnings	$         308,520
Subtotal	$      1,550,520
Less: Treasury Stock [4600-1840-2300]*25	$         (11,500)
Total stockholder's Equity	$      1,539,020