Question

Morrow Enterprises Inc. manufactures bathroom fixtures. The stockholders’ equity accounts of Morrow Enterprises Inc., with balances on January 1, 20Y5, are as follows:

Common stock, $20 stated value (500,000 shares authorized, 363,000 shares issued)	$7,260,000
Paid-In Capital in Excess of Stated Value—Common Stock	834,900
Retained Earnings	32,541,000
Treasury Stock (25,900 shares, at a cost of $19 per share)	492,100

The following selected transactions occurred during the year:

Jan.	22	Paid cash dividends of $0.09 per share on the common stock. The dividend had been properly recorded when declared on December 1 of the preceding fiscal year for $30,339.
Apr.	10	Issued 80,000 shares of common stock for $23 per share.
Jun.	6	Sold all of the treasury stock for $25 per share.
Jul.	5	Declared a 3% stock dividend on common stock, to be capitalized at the market price of the stock, which is $26 per share.
Aug.	15	Issued the certificates for the dividend declared on July 5.
Nov.	23	Purchased 33,000 shares of treasury stock for $19 per share.
Dec.	28	Declared a $0.10-per-share dividend on common stock.
	31	Closed the two dividends accounts to Retained Earnings.

	Required:
A.	Enter the January 1 balances in T accounts for the stockholders’ equity accounts listed.
B.	Journalize the entries to record the transactions, and post to the eight selected accounts. No post ref is required in the journal. Refer to the Chart of Accounts for exact wording of account titles.
C.	Prepare a retained earnings statement for the year ended December 31, 20Y5. Assume that Morrow Enterprises had net income for the year ended December 31, 20Y5, of $1,218,500. For those boxes in which you must enter subtractive or negative numbers use a minus sign. The word “Less” is not required.*
D.	Prepare the Stockholders’ Equity section of the December 31, 20Y5, balance sheet. For those boxes in which you must enter subtractive or negative numbers use a minus sign.* *Refer to the list of Amount Descriptions provided for the exact wording of the answer choices for text entries.

CHART OF ACCOUNTS
Morrow Enterprises Inc.
General Ledger
ASSETS 110 Cash 120 Accounts Receivable 131 Notes Receivable 132 Interest Receivable 141 Merchandise Inventory 145 Office Supplies 151 Prepaid Insurance 181 Land 193 Equipment 194 Accumulated Depreciation-Equipment LIABILITIES 210 Accounts Payable 221 Notes Payable 226 Interest Payable 231 Cash Dividends Payable 236 Stock Dividends Distributable 241 Salaries Payable 261 Mortgage Note Payable EQUITY 311 Common Stock 313 Paid-In Capital in Excess of Stated Value-Common Stock 315 Treasury Stock 321 Preferred Stock 322 Paid-In Capital in Excess of Par-Preferred Stock 331 Paid-In Capital from Sale of Treasury Stock 340 Retained Earnings 351 Cash Dividends 352 Stock Dividends 390 Income Summary	REVENUE 410 Sales 610 Interest Revenue EXPENSES 510 Cost of Merchandise Sold 515 Credit Card Expense 520 Salaries Expense 531 Advertising Expense 532 Delivery Expense 533 Selling Expenses 534 Rent Expense 535 Insurance Expense 536 Office Supplies Expense 537 Organizational Expenses 562 Depreciation Expense-Equipment 590 Miscellaneous Expense 710 Interest Expense

ted corporate transactions

Instructions

Chart of Accounts

Amount Descriptions

T Accounts

Journal

Retained Earnings Statement

Stockholders’ Equity

X

Instructions

Morrow Enterprises Inc. manufactures bathroom fixtures. The stockholders’ equity accounts of Morrow Enterprises Inc., with balances on January 1, 20Y5, are as follows:

Common stock, $20 stated value (500,000 shares authorized, 363,000 shares issued)	$7,260,000
Paid-In Capital in Excess of Stated Value—Common Stock	834,900
Retained Earnings	32,541,000
Treasury Stock (25,900 shares, at a cost of $19 per share)	492,100

The following selected transactions occurred during the year:

Jan.	22	Paid cash dividends of $0.09 per share on the common stock. The dividend had been properly recorded when declared on December 1 of the preceding fiscal year for $30,339.
Apr.	10	Issued 80,000 shares of common stock for $23 per share.
Jun.	6	Sold all of the treasury stock for $25 per share.
Jul.	5	Declared a 3% stock dividend on common stock, to be capitalized at the market price of the stock, which is $26 per share.
Aug.	15	Issued the certificates for the dividend declared on July 5.
Nov.	23	Purchased 33,000 shares of treasury stock for $19 per share.
Dec.	28	Declared a $0.10-per-share dividend on common stock.
	31	Closed the two dividends accounts to Retained Earnings.

	Required:
A.	Enter the January 1 balances in T accounts for the stockholders’ equity accounts listed.
B.	Journalize the entries to record the transactions, and post to the eight selected accounts. No post ref is required in the journal. Refer to the Chart of Accounts for exact wording of account titles.
C.	Prepare a retained earnings statement for the year ended December 31, 20Y5. Assume that Morrow Enterprises had net income for the year ended December 31, 20Y5, of $1,218,500. For those boxes in which you must enter subtractive or negative numbers use a minus sign. The word “Less” is not required.*
D.	Prepare the Stockholders’ Equity section of the December 31, 20Y5, balance sheet. For those boxes in which you must enter subtractive or negative numbers use a minus sign.* *Refer to the list of Amount Descriptions provided for the exact wording of the answer choices for text entries.

X

Chart of Accounts

CHART OF ACCOUNTS
Morrow Enterprises Inc.
General Ledger
ASSETS 110 Cash 120 Accounts Receivable 131 Notes Receivable 132 Interest Receivable 141 Merchandise Inventory 145 Office Supplies 151 Prepaid Insurance 181 Land 193 Equipment 194 Accumulated Depreciation-Equipment LIABILITIES 210 Accounts Payable 221 Notes Payable 226 Interest Payable 231 Cash Dividends Payable 236 Stock Dividends Distributable 241 Salaries Payable 261 Mortgage Note Payable EQUITY 311 Common Stock 313 Paid-In Capital in Excess of Stated Value-Common Stock 315 Treasury Stock 321 Preferred Stock 322 Paid-In Capital in Excess of Par-Preferred Stock 331 Paid-In Capital from Sale of Treasury Stock 340 Retained Earnings 351 Cash Dividends 352 Stock Dividends 390 Income Summary	REVENUE 410 Sales 610 Interest Revenue EXPENSES 510 Cost of Merchandise Sold 515 Credit Card Expense 520 Salaries Expense 531 Advertising Expense 532 Delivery Expense 533 Selling Expenses 534 Rent Expense 535 Insurance Expense 536 Office Supplies Expense 537 Organizational Expenses 562 Depreciation Expense-Equipment 590 Miscellaneous Expense 710 Interest Expense

X

Amount Descriptions

Amount Descriptions
Cash balance, July 31, 20Y5
Cash dividends
Common stock, $20 stated value (500,000 shares authorized, 363,000 shares issued)
Common stock, $20 stated value (500,000 shares authorized, 423,290 shares issued)
Common stock, $20 stated value (500,000 shares authorized, 456,290 shares issued)
Decrease in retained earnings
Excess over stated value
For the Year Ended December 31, 20Y5
From sale of treasury stock
Increase in retained earnings
Net income
Net loss
Paid-in capital, common stock
Retained earnings
Retained earnings, December 31, 20Y5
Retained earnings, January 1, 20Y5
Stock dividends
Total
Total paid-in capital
Total stockholders’ equity
Treasury stock

Answer 1

A) Entering the January 1 Balances in T-Accounts for ther Stockholders Equity Accounts Listed:
Common Stock
		Jan. 1 Bal.	$7,260,000
		Apr. 10	$1,600,000
		Aug. 15	$265,800
		Dec. 31 Bal	$9,125,800
Paid-In Capital in Excess of Stated Value - Common Stock
		Jan. 1 Bal.	$834,900
		Apr. 10	$240,000
		5-Jul	$79,740
		Dec. 31 Bal	$1,154,640
Retained Earnings
31-Dec	$387,869	Jan. 1 Bal.	$32,541,000
		Dec. 31 Bal	$32,153,131
Treasury Stock
Jan. 1 Bal.	$492,100	6-Jun	$492,100
23-Nov	$627,000
Dec. 31 Bal	$627,000
Paid-In Capital from Sale of Treasury Stock
		6-Jun	$155,400
Stock Dividends Distributable
15-Aug	$265,800	5-Jul	$265,800
Stock Dividends
5-Jul	$345,540	31-Dec	$345,540
Cash Dividends
28-Dec	$42,329	31-Dec	$42,329
B) Preparing the Journal Entries to Record the Transactions:
Date	General Journal	Debit	Credit
22-Jan	Cash Dividends Payable [(363,000 shares - 25,900 shares) x $0.09]	$30,339
	Cash		$30,339
10-Apr	Cash (80,000 shares X  $23)	$1,840,000
	Common Stock (80,000 shares x  $20)		$1,600,000
	Paid-In Capital in Excess of Stated Value - Common Stock [80,000 shares × ($23 - $20)]	$240,000
6-Jun	Cash (25,900 shares x $25)	$647,500
	Treasury Stock (25,900 shares x $19)		$492,100
	Paid-In Capital from Sale of Treasury Stock [25,900 shares x  ($25 - $19)]	$155,400
5-Jul	Stock Dividends [(363,000 shares + 80000 shares) x  3% x  $26]	$345,540
	Stock Dividends Distributable (13,290 shares x  $20)		$265,800
	Paid-In Capital in Excess of Stated Value Common Stock [13,290 shares * ($26 - $20)]	$79,740
15-Aug	Stock Dividends Distributable	$265,800
	Common Stock		$265,800
23-Nov	Treasury Stock (33,000 shares * $19)	$627,000
	Cash		$627,000
28-Dec	Cash Dividends [(363,000 shares + 80,000 shares + 13,290 shares - 33,000 shares) * $0.10]	$42,329
	Cash Dividends Payable		$42,329
31-Dec	Retained Earnings	$387,869
	Stock Dividends		$345,540
	Cash Dividends		$42,329
C) Preparing a Retained Earnings Statement for the Year Ended December 31, 2015:
MORROW ENTERPRISES INC.
Retained Earnings Statement
For the Year Ended December 31, 20Y5
Retained earnings, January 1, 20Y5		$32,541,000
Net Income		0
Less: Cash dividends	$42,329
Stock dividends	$345,540	($387,869)
Retained earnings, December 31, 20Y5		$32,153,131
D) Preparing the Stockholder's Equity Section of the December 31, 20Y5, Balance Sheet:
Stockholders' Equity
Paid-in capital:
Common stock, $20 stated value (500,000 shares authorized, 456,290 shares issued)	9,125,800.00
Excess of issue price over stated value	$1,154,640
From sale of treasury stock	155,400.00
Total paid-in capital		10,435,840.00
Retained earnings		32,153,131.00
Total		42,588,971.00
Deduct treasury stock 33,000 shares at cost)	(627,000.00)
Total stockholders'equity		41,961,971.00