Question

Short Answer - MORAKE
Must Include Supporting Documentation in File Upload portion of exam. Please label page as "Morake."

The following stockholders' equity section was taken from the books of Morake & Berg, Inc on January 1, 2020.

Common Stock, $9 par value, 500,000 shares authorized, 300,000 shares issued and outstanding	2,700,000
Additional paid in capital in excess of par - Common	1,200,000
Additional paid in capital from Treasury Stock transactions	0
Additional paid in capital - retired stock	0
Retained earnings	1,800,000
Total Stockholders' Equity	5,700,000

The following transactions occurred in 2020:

a) On January 3, 2020, Morake & Berg issued 10,000 new shares of its $9 par value common stock for $20 per share. The company paid the underwriter $7,000 in issue costs.

b) On February 5, 2020, Morake & Berg repurchased 50,000 of its shares at a purchase price of $17 per share.

c) On April 1, 2020, Morake & Berg reissued 15,000 of its treasury shares at a price of $15 per share.

d) On August 1, 2020, Morake & Berg opted to retire 8,000 of the treasury shares.

e) On December 31, 2020, Morake & Berg declared a net profit for the year of $1,500,000.

f) On December 31, 2020, Morake & Berg declared dividends of $400,000 to be paid on January 25, 2021. (Note, you are not required to calculate total number shares outstanding since total dollar amount of dividend is given.)

REQUIRED:
Based on the information above, please answer the following questions as of December 31, 2020. Your supporting documentation should clearly show how you arrived at the answers you provide below given (a) through (f) above. You may opt to show your work using journal entries, T-accounts, or a clear calculation of what is increasing/decreasing each account.

1. What is the 12/31/2020 balance of Additional Paid-in-Capital for Common Stock?   

2. What is the 12/31/2020 balance of Treasury Stock?   

3. What is the 12/31/2020 balance of Retained Earnings?   

Answer 1

Solution:

1. Journal Entries

2. Calculation of Balance as on 31st December 2020