Question

On December 31, 2021, Cullumber Company had 1,265,000 shares of $5 par common stock issued and outstanding. At December 31, 2021, stockholders’ equity had the amounts listed here. Common Stock $6,325,000 Additional Paid-in Capital 1,885,000 Retained Earnings 1,260,000 Transactions during 2022 and other information related to stockholders’ equity accounts were as follows. 1. On January 10, issued at $108 per share 117,000 shares of $104 par value, 8% cumulative preferred stock. 2. On February 8, reacquired 12,400 shares of its common stock for $14 per share. 3. On May 9, declared the yearly cash dividend on preferred stock, payable June 10, to stockholders of record on May 31. 4. On June 8, declared a cash dividend of $1.00 per share on the common stock outstanding, payable on July 10, to stockholders of record on July 1. 5. Net income for 2022 was $3,653,000.

Record the journal entries that are required for items 1–5 above.

Prepare the stockholders’ equity section of Cullumbers' balance sheet at December 31, 2022.

Answer 1

Solution

Journal Entry

Date	Account title and explanation	Debit ($)	Credit ($)
Jan. 10	Cash (117,000x$108)	12,636,000
	Preferred stock (117,000x$104)		12,168,000
	Paid in capital in excess of par value-Preferred stock		468,000
Feb. 8	Treasury stock (12,400x$14)	173,600
	Cash		173,600
May. 9	Cash dividend	973,440
	Dividend payable (12,168,000x8%)		973,440
Jun. 8	Cash dividend	1,252,600
	Dividend payable (1,265,000-12,400)x$1.00		1,252,600
Jun. 10	Dividend payable	973,440
	Cash		973,440
Jul. 10	Dividend payable	1,252,600
	Cash		1,252,600
Dec. 31	Income summary	36,53,000
	Retained earnings		36,53,000
	(To close net income)
Dec. 31	Retained earnings (1,252,600+973,440)	22,26,040
	Cash dividend		22,26,040
	(To close Cash divided)

2) Stockholder's Equity

Paid in capital	Amount ($)
Common Stock (given in question)	63,25,000 (1)
8% cumulative preferred stock	1,21,68,000 (2)
Total capital stock	1,84,93,000 (3 = 1+2)
Paid in capital in excess of par -Common stock	18,85,000 (4)
Paid in capital in excess of par-preferred stock	4,68,000 (5)
Additional Paid in capital	23,53,000 (6 = 4+5)
Total Paid in capital	2,08,46,000 (3+6)
Retained Earnings (12,60,000+36,53,000-22,26,040)	26,86,960
Less: Treasury stock	(173,600)
Total Stockholder equity (2,08,46,000+26,86,960-1,73,600)	233,59,360

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