Question

Stockholders’ Equity: Transactions and Balance Sheet Presentation

The stockholders’ equity of Summit Corporation at January 1 follows:

7 Percent preferred stock, $100 par value, 20,000 shares authorized;
5,000 shares issued and outstanding	$500,000
Common stock, $15 par value, 100,000 shares authorized;
40,000 shares issued and outstanding	600,000
Paid-in capital in excess of par value-Preferred stock	24,000
Paid-in capital in excess of par value-Common stock	360,000
Retained earnings	325,000
Total Stockholders' Equity	$1,809,000

The following transactions, among others, occurred during the year:

Jan.	12	Announced a 3-for-1 common stock split, reducing the par value of the common stock to $5 per share. The authorization was increased to 300,000 shares.
Mar.	31	Converted $40,000 face value of convertible bonds payable (the book value of the bonds was $46,000) to common stock. Each $1,000 bond converted to 125 shares of common stock.
June	1	Acquired equipment with a fair market value of $80,000 in exchange for 500 shares of preferred stock.
Sept.	1	Acquired 10,000 shares of common stock for cash at $14 per share.
Oct.	12	Sold 1,500 treasury shares at $19 per share.
Nov.	21	Issued 5,000 shares of common stock at $14 per share.
Dec.	28	Sold 1,200 treasury shares at $9 per share.
	31	Closed net income of $95,000 to the Retained Earnings account.

Required

• Prepare journal entries for the given transactions and post them to the T-accounts. Do not prepare the journal entry for the Dec. 31 transaction, but post the appropriate amount to the Retained Earnings T-account. Determine the ending balances for the stockholders’ equity accounts.
• Prepare the stockholders’ equity section of the balance sheet at December 31.

• Journal entries
• T-Accounts
• Stockholder's equity section

General Journal
Date	Description	Debit	Credit
Jan.12	(Memorandum) Common Stock split 3 for 1.
Mar.31	AnswerCashCommon StockEquipmentPaid-in-Capital from Treasury StockPaid-in-Capital in Excess of Par Value - Common StockPaid-in-Capital in Excess of Par Value - Preferred StockPreferred StockTreasury Stock - CommonBonds PayablePremium             on Bonds Payable	Answer	Answer
	Premium on Bonds Payable	Answer	Answer
	Common Stock	Answer	Answer
	AnswerCashCommon StockEquipmentPaid-in-Capital from Treasury StockPaid-in-Capital in Excess of Par Value - Common StockPaid-in-Capital in Excess of Par Value - Preferred StockPreferred StockTreasury Stock - CommonBonds PayablePremium             on Bonds Payable	Answer	Answer
	To record conversions of bonds.
Jun.01	AnswerCashCommon StockEquipmentPaid-in-Capital from Treasury StockPaid-in-Capital in Excess of Par Value - Common StockPaid-in-Capital in Excess of Par Value - Preferred StockPreferred StockTreasury Stock - CommonBonds PayablePremium             on Bonds Payable	Answer	Answer
	AnswerCashCommon StockEquipmentPaid-in-Capital from Treasury StockPaid-in-Capital in Excess of Par Value - Common StockPaid-in-Capital in Excess of Par Value - Preferred StockPreferred StockTreasury Stock - CommonBonds PayablePremium             on Bonds Payable	Answer	Answer
	Paid-in-Capital in Excess of Par Value - Preferred Stock	Answer	Answer
	Issued preferred stock in exchange for equipment.
Sept.01	AnswerCashCommon StockEquipmentPaid-in-Capital from Treasury StockPaid-in-Capital in Excess of Par Value - Common StockPaid-in-Capital in Excess of Par Value - Preferred StockPreferred StockTreasury Stock - CommonBonds PayablePremium             on Bonds Payable	Answer	Answer
	AnswerCashCommon StockEquipmentPaid-in-Capital from Treasury StockPaid-in-Capital in Excess of Par Value - Common StockPaid-in-Capital in Excess of Par Value - Preferred StockPreferred StockTreasury Stock - CommonBonds PayablePremium             on Bonds Payable	Answer	Answer
	Purchased treasury stock.
Oct.12	AnswerCashCommon StockEquipmentPaid-in-Capital from Treasury StockPaid-in-Capital in Excess of Par Value - Common StockPaid-in-Capital in Excess of Par Value - Preferred StockPreferred StockTreasury Stock - CommonBonds PayablePremium             on Bonds Payable	Answer	Answer
	Treasury Stock - Common	Answer	Answer
	AnswerCashCommon StockEquipmentPaid-in-Capital from Treasury StockPaid-in-Capital in Excess of Par Value - Common StockPaid-in-Capital in Excess of Par Value - Preferred StockPreferred StockTreasury Stock - CommonBonds PayablePremium             on Bonds Payable	Answer	Answer
	Sold treasury stock.
Nov.21	AnswerCashCommon StockEquipmentPaid-in-Capital from Treasury StockPaid-in-Capital in Excess of Par Value - Common StockPaid-in-Capital in Excess of Par Value - Preferred StockPreferred StockTreasury Stock - CommonBonds PayablePremium             on Bonds Payable	Answer	Answer
	Common Stock	Answer	Answer
	AnswerCashCommon StockEquipmentPaid-in-Capital from Treasury StockPaid-in-Capital in Excess of Par Value - Common StockPaid-in-Capital in Excess of Par Value - Preferred StockPreferred StockTreasury Stock - CommonBonds PayablePremium             on Bonds Payable	Answer	Answer
	Issued common stock.
Dec.28	AnswerCashCommon StockEquipmentPaid-in-Capital from Treasury StockPaid-in-Capital in Excess of Par Value - Common StockPaid-in-Capital in Excess of Par Value - Preferred StockPreferred StockTreasury Stock - CommonBonds PayablePremium             on Bonds Payable	Answer	Answer
	Paid-in-Capital from Treasury Stock	Answer	Answer
	AnswerCashCommon StockEquipmentPaid-in-Capital from Treasury StockPaid-in-Capital in Excess of Par Value - Common StockPaid-in-Capital in Excess of Par Value - Preferred StockPreferred StockTreasury Stock - CommonBonds PayablePremium             on Bonds Payable	Answer	Answer
	To record sale of treasury stock.

Answer 1