In: Accounting
Eriksen Corporation has the following stockholders' equity accounts on January 1, 2019:
Common Stock, $10 par value .............................................. $3,000,000
Paid-in Capital in Excess of Par............................................ 400,000
Paid-in Capital: Treasury Stock ............................................ 4,000
Retained Earnings.................................................................. 1,000,000
Treasury Stock (16,000 shares at cost).................................. (160,000)
Total Stockholders' Equity.............................................. $4,244,000
April 1 Issued for cash 8,000 shares of treasury stock at $12 per share.
October 1 Issued for cash additional 4,000 shares of treasury stock at $4 per share.
December 1 Purchased 20,000 shares for treasury for $200,000 cash
December 31 Net loss for the year amounted to $106,000.
Instructions:
a) Prepare journal entries to record the above events
b) Determine the number of shares issued and outstanding on December 31, 2019, end of fiscal year.
c) What is the balance of Retained Earnings at December 31, 2019?
Cost of treasury stock per share=160000/16000=$ 10 per share | ||||||||
a) | Journal entries: | |||||||
Date | General journal | Debit | Credit | |||||
Apr 1. | Cash | (8000*12) | 96000 | |||||
Treasury Stock | (8000*10) | 80000 | ||||||
Paid-in Capital: Treasury Stock | (Plug) | 16000 | ||||||
(Treasury stock reissued) | ||||||||
Oct 1. | Cash | (4000*4) | 16000 | |||||
Paid-in Capital: Treasury Stock | (4000+16000) | 20000 | ||||||
Retained earnings | (Plug) | 4000 | ||||||
Treasury Stock | (4000*10) | 40000 | ||||||
(Treasury stock reissued) | ||||||||
Dec 1. | Treasury Stock | 200000 | ||||||
Cash | 200000 | |||||||
(Treasury stock purchased) | ||||||||
Dec 31. | Retained earnings | 106000 | ||||||
Income summary | 106000 | |||||||
(To close income summary) | ||||||||
b) | Number of shares issued and outstanding on December 31, 2019=Shares in common stock as on Dec 31,2019-Shares in treasury stock as on Dec 31,2019 | |||||||
Shares in common stock as on Dec 31,2019=3000000/10=300000 | ||||||||
Shares in treasury stock as on Dec 31,2019: | ||||||||
$ | $ | |||||||
Shares in treasury stock as on Jan 1,2019 | 16000 | |||||||
Add: purchased on Dec 1. | 20000 | |||||||
36000 | ||||||||
Less:Treasury stock reissued | ||||||||
Apr 1. | 8000 | |||||||
Oct 1. | 4000 | 12000 | ||||||
Shares in treasury stock as on Dec 31,2019 | 24000 | |||||||
Number of shares issued and outstanding on December 31, 2019=300000-24000=276000 shares | ||||||||
c) | Balance of Retained Earnings at December 31, 2019: | |||||||
$ | $ | |||||||
Balance of Retained Earnings at January 1, 2019 | 1000000 | |||||||
Less: | ||||||||
Treasury stock reissued below cost on Oct 1. | 4000 | |||||||
Net loss | 106000 | 110000 | ||||||
Balance of Retained Earnings at December 31, 2019 | 890000 | |||||||