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	Particulars	Debit	Credit
January 1, 2015	Cash	49600000 (1600000*31 = 49600000)
	Common Stock		3200000 (1600000*2 = 3200000)
	Paid in Capital in excess of common stock		46400000 (1600000*29 = 46400000)
June 30, 2015	Retained Earnings	2400000 (1600000*1.50 = 2400000)
	Dividend Payable		2400000 (1600000*1.50 = 2400000)
August 30, 2015	Dividend Payable	2400000
	Cash		2400000
November 1,2015	Treasury Stock	11520000 (320000*36 = 2400000)
	Cash		11520000
December 22,2015	Cash	6720000 (160000*42 = 6720000)
	Treasury Stock		5760000 (160000*36 = 5760000)
	Paid in Capital in excess of Treasury stock		960000 (160000*6 = 960000)

b)

Particulars	Amount ($)
Common Stock	3200000
Paid in Capital in excess of common stock	46400000
Add: Net Income	8500000
Less: Dividend paid	2400000
Sub Total	55700000
Less: Treasury Stock	11520000
Add: Treasury Stock reissued	6720000
Stockholders’ equity	50900000