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In: Accounting

Eriksen Corporation has the following stockholders' equity accounts on January 1, 2019:             Common Stock, $10...

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?

Solutions

Expert Solution

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

ekkarill92 answered 2 years ago
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