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Common stock—$10 par value, 100,000 shares authorized, 55,000 shares issued and outstanding $550,000 Paid-in capital in...

Common stock—$10 par value, 100,000 shares authorized,
55,000 shares issued and outstanding		 $550,000
Paid-in capital in excess of par value, common stock 60,000
Retained earnings 460,000
Total stockholders' equity $1,070,000


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

Jan. 1 Purchased 4,500 shares of its own stock at $20 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 1,688 of its treasury shares at $24 cash per share.
Aug. 22 Sold 2,812 of its treasury shares at $17 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 $408,000 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
Date General Journal Debit Credit
1-Jan Treasury stock, Common 90,000 =4500*20
Cash 90,000
5-Jan Retained earnings 202,000 =(55000-4500)*4
Common dividend payable 202,000
28-Feb Common dividend payable 202,000
Cash 202,000
6-Jul Cash 40,512 =1688*24
Treasury stock, Common 33,760 =1688*20
Paid-in capital, Treasury stock 6,752
22-Aug Cash 47,804 =2812*17
Paid-in capital, Treasury stock 6,752
Retained earnings 1,684
Treasury stock, Common 56,240 =2812*20
5-Sep Retained earnings 220,000 =55000*4
Common dividend payable 220,000
28-Oct Common dividend payable 220,000
Cash 220,000
31-Dec Income summary 408,000
Retained earnings 408,000
2
Statement of Retained Earnings
For Year Ended December 31, 2017
Retained earnings, Dec. 31, 2016 460,000
Add: Net income 408,000
868,000
Less: Cash dividends declared -422,000
Less: Treasury stock reissuances -1,684
Retained earnings, Dec. 31, 2017 444,316
3
Stockholders' Equity Section of the Balance Sheet
December 31, 2017
Common stock - $10 par value 550,000
Paid-in capital in excess of par value, common stock 60,000
Total contributed capital 610,000
Retained earnings 444,316
Total stockholders' equity 1,054,316

ekkarill92 answered 1 year ago
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