Common stock—$20 par value, 100,000 shares authorized, 55,000 shares issued and outstanding $ 1,100,000 Paid-in capital...


Common stock—$20 par value, 100,000 shares authorized, 55,000 shares issued and outstanding	$	1,100,000
Paid-in capital in excess of par value, common stock		60,000
Retained earnings		460,000
Total stockholders' equity	$	1,620,000

In year 2017, the following transactions affected its stockholders’ equity accounts.

Jan.	1	Purchased 5,500 shares of its own stock at $25 cash per share.
Jan.	5	Directors declared a $4 per share cash dividend payable on February 28 to the February 5 stockholders of record.
Feb.	28	Paid the dividend declared on January 5.
July	6	Sold 2,063 of its treasury shares at $29 cash per share.
Aug.	22	Sold 3,437 of its treasury shares at $22 cash per share.
Sept.	5	Directors declared a $4 per share cash dividend payable on October 28 to the September 25 stockholders of record.
Oct.	28	Paid the dividend declared on September 5.
Dec.	31	Closed the $388,000 credit balance (from net income) in the Income Summary account to Retained Earnings.

Required:
1. Prepare journal entries to record each of these transactions for 2017.
2. Prepare a statement of retained earnings for the year ended December 31, 2017.
3. Prepare the stockholders' equity section of the company’s balance sheet as of December 31, 2017.

Solutions

Expert Solution

1. In the books of ........:

Date	Account Titles	Debit	Credit
2017		$	$
Jan 1	Treasury Stock	137,500
	Cash		137,500
Jan 5	Retained Earnings ( 1,100,000 / 20 - 5,500 ) * 4	198,000
	Dividends Payable		198,000
Feb 28	Dividends Payable	198,000
	Cash		198,000
July 6	Cash	59,827
	Treasury Stock ( 2,063 x $ 25 )		51,575
	Paid-in Capital: Treasury Stock		8,252
Aug 22	Cash	75,614
	Paid-in Capital : Treasury Stock	8,252
	Retained Earnings	2,059
	Treasury Stock		85,925
Sep 5	Retained Earnings	220,000
	Dividends Payable		220,000
Dec 31	Income Summary	388,000
	Retained Earnings		388,000

Statement of Retained Earnings For the year ended December 31, 2017
Retained Earnings, January 1	$ 460,000
Add: Net Income	388,000
Less: Dividends	(418,000)
Less: Loss on Treasury Stock	(2,059)
Retained Earnings, December 31	$ 427,941

Balance Sheet ( Partial ) December 31, 2017 Stockholders Equity
Common Stock, $ 20 par, 100,000 shares authorized, 55,000 shares issued and authorized	$1,100,000
Paid-in Capital in Excess of Par: Common Stock	60,000
Retained Earnings	427,941
Total Stockholders' Equity	$1,587,941

ekkarill92 answered 1 year ago

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