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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

2.

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

3.

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 2 years ago
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