Question

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

Common stock—$10 par value, 140,000 shares authorized, 60,000 shares issued and outstanding	$	600,000
Paid-in capital in excess of par value, common stock		90,000
Retained earnings		500,000
Total stockholders' equity	$	1,190,000

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

Jan.		1		Purchased 6,000 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 2,300 of its treasury shares at $27 cash per share.
Aug.		22		Sold 3,700 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 $223,000 credit balance (from net income) in the Income Summary account to Retained Earnings.

For each transaction, indicate the impact on total stockholders' equity. Enter decreases to equity as negative values. Verify that total Stockholders' equity as of December 31, 2017, as calculated, agrees with the amount reported on the balance sheet.

UnadjustedAdjustedPost-closing

Dates:

Jan 01

to:

Dec 31

Impact on equity $ Total Stockholders' Equity - December 31, 2016 $1,190,000 Jan. 1) Purchased 6,000 shares of its own stock at $23 cash per share. Stockholders' equity increased Jan. 5) Directors declared a $2 per share cash dividend payable on Feb. 28 to the Feb. 5 stockholders of record. Feb. 28) Paid the dividend declared on January 5. Jul. 6) Sold 2,300 of its treasury shares at $27 cash per share. Aug. 22) Sold 3,700 of its treasury shares at $20 cash per share. Sep. 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 $223,000 credit balance (from net income) in the Income Summary account to Retained Earnings.

Answer 1

Date	General journal	Debit	Credit
01-Jan	Treasury stock	$1,38,000
	cash (6000*$23)		$1,38,000
	To Record Purchase of Own stock
05-Jan	Retained earnings    (60000-6000)*2	$1,08,000
	Dividends payable		$1,08,000
	TO Record dividend declared
28-Feb	Dividends payable	$1,84,000
	cash		$1,84,000
	To Record dividend Paid
06-Jul	Cash   (2300*$27)	$62,100
	Treasury stock		$52,900
	paid in capital in excess of par- TS		$9,200
	To Record Sale of Own Stock
22-Aug	Cash (3700*20)	$74,000
	paid in capital in excess of par -TS	$9,200
	Retained earnings	$1,900
	Treasury stock  (3700*23)		$85,100
	To Record Sale of Own Stock
05-Sep	Retained earnings	$1,20,000
	Dividends payable (60000*2)		$1,20,000
	TO Record Decleration of Dividend
28-Oct	Dividends payable	$1,20,000
	cash		$1,20,000
	TO record Dividend Paid
31-Dec	Income summary	$22,30,000
	Retained earnings		$2,23,000
	To Record the close of Income Summary Account

Statement of retained earnings
opening balance ,jan 1		$5,00,000
add :Net income		$2,23,000
		$7,23,000
less:Cash Dividend		$3,04,000
Treasury stock		$1,900
Closing balance,Dec 31		$4,17,100
Stockholders Equity section of the Balance Sheet
common stock		$6,00,000
paid in capital in excess of par		$90,000
Total contributed capital (a)		$6,90,000
Retained earnings (b)		$4,17,100
total Stockholders Equity (a+b)		$11,07,100