Question

The Stockholders’ Equity section of the balance sheet of Willy Corporation on January 1, 2016, is shown below; selected transactions for the year follow:

Stockholders’ Equity
Preferred Stock (10% cumulative, $10 par value,          200,000 shares authorized)
Issued and Outstanding, 7,300 Shares				$	73,000
Paid-in Capital in Excess of Par Value					7,300		$	80,300
Common Stock (no-par value, $50 stated value,        130,000 shares authorized)
Issued and Outstanding, 1,300 Shares					65,000
Paid-in Capital in Excess of Stated Value					2,600			67,600
Total Paid-in Capital							$	147,900
Retained Earnings								123,000
Total Stockholders’ Equity							$	270,900
DATE		TRANSACTIONS
Feb.	15		Repurchased 4,200 shares of the outstanding preferred stock for $46,200 in cash. The stock is to be held as treasury stock. State law requires that an amount of retained earnings equal to the cost of treasury stock held must be appropriated. Record the purchase and the appropriation of retained earnings.
Mar.	4		Declared a 2-for-1 stock split of common stock. Each shareholder will own twice as many shares as originally owned. Stated value is reduced to $25 per share. Date of record is March 15. Date of issue of new shares is April 1.
April	1		Issued new shares called for by split.
June	17		Declared semiannual dividend of 5 percent on preferred stock, to be paid on July 12 to holders of record on June 30.
July	12		Paid cash dividend on preferred stock.
Sept.	25		Purchased 400 shares of outstanding preferred stock at $10 per share to be held as treasury stock. Record appropriated retained earnings equal to cost of the treasury stock.
Dec.	15		Declared semiannual cash dividend of 5 percent on preferred stock to be paid on January 12 to holders of record on December 30.
	15		Declared cash dividend of $1.10 per share on common stock to be paid on January 12 to holders of record on December 30.
	15		Accepted title to a tract of land with an appraised value of $143,000 from the City of Greenville. The tract is to be used as a building site for the corporation’s new factory.
	31		Had net income after taxes for the year of $63,000. Give the entry to close the Income Summary account.

    

2.	Record the transactions in general journal form. (If no entry is required for a particular transaction, select "No journal entry required" in the first account field.)

Record the purchase of treasury stock.

Record the appropriation for treasury stock.

Record the stock split.

Record the issuance of new shares as a result of the stock split.

Record the declaration of the dividend on June 17.

Record the declaration of dividends payable to stockholders of record as of June 30.

Record the payment of the dividend on July 12.

Record the purchase of treasury stock on September 25.

Record the declaration of the dividend on preferred stock on December 15.

Record the declaration of the dividend on common stock on December 15.

Prepare the Stockholders’ Equity section of the balance sheet.

Answer 1

2. In the books of Willy Corporation :

Date	Account Titles	Debit	Credit
		$	$
Feb 15	Treasury Stock: Preferred	46,200
	Cash		46,200
	Retained Earnings	46,200
	Appropriated Retained Earnings: Treasury Stock		46,200
March 4	No journal entry required
April 1	No journal entry required
June 17	Retained Earnings	1,550
	Dividends Payable : Preferred Stock ( 7,300 - 4,200) x $ 10 x 5%)		1,550
July 12	Dividends Payable : Preferred Stock	1,550
	Cash		1,550
Sept 25	Treasury Stock : Preferred	4,000
	Cash		4,000
	Retained Earnings	4,000
	Appropriated Retained Earnings: Treasury Stock		4,000
Dec 15	Retained Earnings	1,350
	Dividends Payable: Preferred Stock		1,350
Dec 15	Retained Earnings	2,860
	Dividends Payable : Common Stock ( 1,300 x 2 x $ 1.10)		2,860
Dec 15	Land	143,000
	Cash		143,000
Dec 31	Income Summary	63,000
	Retained Earnings		63,000

3. Willy Corporation

Balance Sheet (Partial)

December 31, 2016

Stockholders' Equity	$	$
Preferred Stock	73,000
Paid-in Capital in Excess of Par : Preferred Stock	7,300	80,300
Common Stock, ( no par value, $ 25 stated value, 130,000 shares authorized)	65,000
Paid-in Capital in Excess of State Value : Common Stock	2,600	67,600
Total Paid-in Capital		147,900
Retained Earnings	180,240
Less: Appropriated	(50,200)
Retained Earnings, Unappropriated		130,040
Total Stockholders' Equity		277,940