Question

Entries for Selected Corporate Transactions

Morrow Enterprises Inc. manufactures bathroom fixtures. Morrow Enterprises’ stockholders’ equity accounts, with balances on January 1, 20Y6, are as follows:

Common Stock, $10 stated value (400,000 shares authorized, 260,000 shares issued)	$2,600,000
Paid-In Capital in Excess of Stated Value-Common Stock	500,000
Retained Earnings	5,900,000
Treasury Stock (26,000 shares, at cost)	390,000

The following selected transactions occurred during the year:

Jan. 22.	Paid cash dividends of $0.13 per share on the common stock. The dividend had been properly recorded when declared on December 1 of the preceding fiscal year for $30,420.
Apr. 10.	Issued 50,000 shares of common stock for $900,000.
June 6.	Sold all of the treasury stock for $18 per share.
July 5.	Declared a 4% Stock dividend on common stock, to be capitalized at the market price of the stock, which is $20 per share.
Aug. 15.	Issued shares of stock for the stock dividend declared on July 5.
Nov. 23.	Purchased 16,000 shares of treasury stock for $20 per share.
Dec. 28.	Declared a $0.16-per-share dividend on common stock.
31.	Closed the credit balance of the income summary account, $6,136,000.
31.	Closed the two dividends accounts to Retained Earnings.

Required:

1. The January 1 balances have been entered in T accounts for the stockholders' equity accounts. Record the above transactions in the T accounts and provide the December 31 balance where appropriate. If required, round to one decimal place.

Common Stock
		Jan. 1 Bal.	2,600,000
		Dec. 31 Bal.

Paid-In Capital in Excess of Stated Value-Common Stock
		Jan. 1 Bal.	500,000
		Dec. 31 Bal.

Retained Earnings
		Jan. 1 Bal.	5,900,000
		Dec. 31 Bal.

Treasury Stock
Jan. 1 Bal.	390,000
Dec. 31 Bal.

Paid-In Capital from Sale of Treasury Stock

Stock Dividends Distributable

Stock Dividends

Cash Dividends

2. Journalize the entries to record the transactions. For a compound transaction, if an amount box does not require an entry, leave it blank.

Jan. 22. Paid cash dividends of $0.13 per share on the common stock. The dividend had been properly recorded when declared on December 1 of the preceding fiscal year for $30,420.

Date	Account	Debit	Credit
Jan. 22

Apr. 10. Issued 50,000 shares of common stock for $900,000.

Date	Account	Debit	Credit
Apr. 10

June 6. Sold all of the treasury stock for $18 per share.

Date	Account	Debit	Credit
June 6

July 5. Declared a 4% stock dividend on common stock, to be capitalized at the market price of the stock, which is $20 per share.

Date	Account	Debit	Credit
July 5

Aug. 15. Issued shares of stock for the dividend declared on July 5.

Date	Account	Debit	Credit
Aug. 15

Nov. 23. Purchased 16,000 shares of treasury stock for $20 per share.

Date	Account	Debit	Credit
Nov. 23

Dec. 28. Declared a $0.16-per-share dividend on common stock.

Date	Account	Debit	Credit
Dec. 28

Dec. 31. Closed the credit balance of the income summary account, $6,136,000.

Date	Account	Debit	Credit
Dec. 31

Dec. 31. Closed the two dividends accounts to Retained Earnings.

Date	Account	Debit	Credit
Dec. 31

3. Prepare a retained earnings statement for the year ended December 31, 20Y6.

Morrow Enterprises Inc. Retained Earnings Statement For the Year Ended December 31, 20Y6

4. Prepare the Stockholders' Equity section of the December 31, 20Y6, balance sheet.

Morrow Enterprises Inc. Balance Sheet December 31, 20Y6
Stockholders' Equity
Paid-In-Capital:
Total Paid-In Capital
Total
Total Stockholders' Equity

Answer 1