Question

Houghton Company began business on January 1, 2015 by issuing all of its 1,600,000 authorized shares of its $2 par value common stock for $31 per share. On June 30, Houghton declared a cash dividend of $1.50 per share to stockholders of record on July 31. Houghton paid the cash dividend on August 30. On November 1, Houghton reacquired 320,000 of its own shares of stock for $36 per share. On December 22, Houghton resold 160,000 of these shares for $42 per share.

Required:

a.	Prepare all of the necessary journal entries to record the events described above. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)

     

b.	Prepare the stockholders' equity section of the balance sheet as of December 31, 2015 assuming that the net income for the year was $8,500,000.

    

Answer 1

a)

Date	Account	Debit	credit
Jan 1 2015	cash [1600000*31 ]	49600000
	common stock [1600000*2]		3200000
	Paid in capital in excess of par		46400000
June 30	Cash dividend	2400000
	Dividend payable [1600000*1.5]		2400000
July 31	No entry
August 30	Dividend payable	2400000
	cash		2400000
nov 1	Treasury stock [320000*36]	11520000
	cash		11520000
dec 22	cash [160000*42]	6720000
	Paid in capital in excess of cost -treasury stock		960000
	Treasury stock [160000*36]		5760000

b)

stockholders equity As on december 31 2015
common stock		3200000
paid in capital in excess of par -common stock		46400000
paid in capital in excess of cost -treasury stock		960000
Total paid in capital		50560000
Retained earning   [8500000-2400000]		6100000
Total paid in capital and retained earning		56660000
less:Treasury stock [11520000-5760000]		(5760000)
Total stockholders equity		50900000