Question
In: Accounting
6. The stockholders' equity account balances of Kay Corporation for 2020 are given below: January 1...
6.
The stockholders' equity account balances of Kay Corporation
for 2020 are given below:
January 1 December 31
Common stock ...................... 648,000 720,000
Paid-in capital – common stock .... 540,000 594,000
Treasury stock .................... 160,000 36,800
Paid-in capital – treasury stock .. 5,000 ?
Retained earnings ................. 425,000 ?
The common stock account at January 1 consisted of 54,000 shares
that were outstanding at a $12 par value per share.
The treasury stock account at January 1 consisted of 10,000 shares
that had been re-acquired at a $16 cost per share.
During 2020, Kay Corporation entered into the following transactions:
March 23 Re-issued 2,400 of the treasury shares for $22 per share
June 9 Re-issued 3,700 of the treasury shares for $13 per share
August 15 Issued 6,000 shares of previously un-issued common stock
November 2 Re-issued 1,600 of the treasury shares for $14 per share
December 18 Declared and paid a $3.75 dividend per share on the
outstanding shares of common stock
Kay Corporation reported a net income of $293,760 for 2020.
Calculate the retained earnings account balance at December 31, 2020.Solutions
Expert Solution
| Computation of Profit or loss on reissue of treasury stock (adjusted in retained earnings) | |||||||
| Paid in capital-Treasury stock beginning balance | 5,000 | ||||||
| Reissue on Mar23: | |||||||
| Sale price (2400*22) | 52800 | ||||||
| Less: Cost (2400*16) | 38400 | ||||||
| Profit transferred to Paid in capital | 14,400 | ||||||
| Reissue on June 9; | |||||||
| Sales price (3700*13) | 48100 | ||||||
| Cost (3700*16) | 59200 | ||||||
| Loss transferred to paid in capital | -11100 | ||||||
| Reissue on Nov 02: | |||||||
| Sale price (1600*14) | 22,400 | ||||||
| Cost (1600*16) | 25,600 | ||||||
| Loss transferred to paid in capital | -3,200 | ||||||
| Net ending balance of Paid in capital -Treasury stock | 5,100 | ||||||
| (this means no amount transferred to retained earnings) | |||||||
| Computation of outstanding shares on Dec31: | |||||||
| Outstanding shares in the beginning (54,000-10,000) | 44,000 | ||||||
| Add: Reissue during the year (2400+3700+1600) | 7,700 | ||||||
| Add: Unissued shares issued | 6,000 | ||||||
| Outstanding shares at the end | 57,700 | ||||||
| Computation of Ending balance of Retained earnings: | |||||||
| Beginning balance of Retained eaarnings | 4,25,000 | ||||||
| Add: Net Income | 2,93,760 | ||||||
| Less: Dividend (57,700 shares @ 3.75) | -2,16,375 | ||||||
| Ending balance of Retained earnings | 5,02,385 | ||||||
| Answer is $502,385 | |||||||
ekkarill92 answered 1 year agoRelated Solutions
The stockholders' equity account balances of Kay Corporation for 2020 are given below: January 1 December...
The stockholders' equity account balances of Kay Corporation for 2020 are
given below:
January 1 December 31
Common stock ($12 par, 54,000 shares outstanding) ..... 648,000 720,000
Paid-in capital – common stock ........................ 540,000 594,000
Treasury stock (10,000 share; $16 cost per share) ..... 160,000 36,800
Paid-in capital – treasury stock ...................... 5,000 ?
Retained earnings ..................................... 425,000 ?
During 2020, Kay Corporation entered into the following transactions:
March 23 Re-issued 2,400 of the treasury shares for $13 per share...
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_____________________________________
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(a)
Your Answer
Correct Answer (Used)
Journalize...
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