Question

Information:

Retro Corp. began business January 1, 2018. The following transactions, impacting owners’ equity, occurred between January 1, 2018 and December 31, 2020 (the current date):

1) On January 1, 2018, Renfro received authorization to issue 100,000 shares of $1 par value common stock. During 2018, 60,000 shares were issued at $30 per share.

2) On January 1, 2018, Renfro received authorization to issue 50,000 shares of 5%, $10 par value preferred stock. During 2018, 40,000 shares were issued at $100 per share.

3) On October 31, 2019, Renfro declared a 15% common stock dividend (i.e. the dividend was payable TO common stockholders and the payment was in the form of additional shares of common stock). At the time the dividend was declared, the market price of the stock was $43.

4) On November 3, 2019, Renfro issued the stock from the dividend declared on October 31st .

5) On March 31, 2020, Renfro purchased 5,000 shares of the company’s own common stock for the treasury at $45 per share. Renfro uses the cost method to record treasury stock transactions.

6) On November 30, 2009, reissued 1,200 of the treasury shares for $42 per share.

Additionally, during the three year period, Renfro reported total net income of $950,000 and paid total cash dividends of $180,000.

REQUIRED:

1. Prepare journal entries related to transactions 1-6.

2. Prepare the December 31, 2020 Owners’ Equity section of Retro’s balance sheet IN GOOD FORM*. Use the following heading: Renfro Corp. Owners’ Equity As of 12/31/2020

Answer 1

Transaction	General journal	Dr	Cr
1)	Cash	$1,800,000
	Common stock (60000*1)		60000
	Paid in capital in excess of par-Common stock (60000*29)		$1,740,000
2)	Cash	$4,000,000
	Preferred stock (40000*10)		$400,000
	Paid in capital in excess of par-Preferred stock (40000*90)		$3,600,000
3)
Oct 31 2019	Retained Earnings	$387,000
	Stock Dividend payable (60000*15%*43)		$387,000
	(No. of stock issued as stock dividend=60000*15%= 9000)
4)	Stock Dividend payable	$387,000
Nov 3 2019	Common stock (9000*1)		$9,000
	Paid in capital in excess of par-Common stock (9000*42)		$378,000
5)	Treasury Stock	$225,000
Mar 31 2020	Cash (5000*45)		$225,000
6)	Cash (1200*42)	$50,400
30-Nov	Retained Earnings (1200*3)	$3,600
	Treasury Stock (1200*45)		$54,000
Additional entries
	Retained Earnings	$950,000
	Income summary		$950,000
	Cash dividend	$180,000
	Retained Earnings		$180,000
Ans 2	Renfro Corp. Owners’ Equity As of 12/31/2020
	Preferred stock	$400,000
	Paid in capital in excess of par-Preferred stock	$3,600,000
	Common stock	$69,000
	Paid in capital in excess of par-Common stock	$2,118,000
	Total paid in capital
	Retained Eranings	379400
	Total paid in capital and Retained Eranings	379400
	Less: Treasury stock (3800*45)	171000
	Ending Balance	208400
working	Statement of Retained Eranings
	Net Income	950000
	Less:
	Cash dividend	($180,000)
	Stock Dividend	($387,000)
	Treasury Stock	($3,600)
	Ending balance	379400

If any doubt please comment.