Question

Prepare journal entries for the dates and statement of equity section

Context Corporation reports the following components of shareholders’ equity on December 31, 20X3:

Common stock - $10 par value; 50,000 shares authorized 20,000 shares issued and outstanding....................... $200,000 Paid-in capital in excess of par value, common stock....... $30,000 Retained earnings...........................................$135,000

In the year 20X4, the following transactions affected its shareholders’ equity accounts:

January 1: Purchased 2,000 shares of its own stock at $20.00 cash per share.

January 5: Directors declared a $2.00 per share dividend payable on February 28 to the February 5 shareholders of record.

February 28: Paid dividend declared on January 5.

July 6: Sold 750 off its treasury shares at $17.00 cash per share. This sale is part of the January 1 purchase at $20.00 per share).

September 5: Directors declared a $2.00 per share cash dividend payable on October 28 to the September 25 shareholders of record.

October 28: Paid the dividend declared on September 5.

December 31: Closed the $194,000 credit balance from net income of December 31, 20X4, in the income summary account to retained earnings.

Answer 1

01-Jan	Treasury stock	40000	(2000*20)
	Cash		40000
05-Jan	Cash dividend	36000	(18000*2)
	Dividend payable		36000
28-Feb	Dividend payable	36000
	Cash		36000
06-Jul	Cash	12750	(750*17)
	Retained earnings	2250	(750*3)
	Treasury stock		15000	(750*20)
05-Sep	Cash dividend	37500	(18750*2)
	Dividend payable		37500
28-Oct	Dividend payable	37500
	Cash		37500
31-Dec	Income summary	194000
	Retained earnings		194000
	Statement of equity
	20000 shares issued and outstanding	200000
	Paid in capital in exxess of par	30000
	Retained earnings	253250
	Total	483250
Less	Treasury stock (1250*20)	25000
	Total equity section	458250
	Retained earnings
	Beginning	135000
Add	Net income	194000
	Total	329000
Less	Cash dividend	73500	(36000+37500)
Less	Treasury stock	2250
	Ending retained earnings	253250