Question

Kendall Company reports the following components of stockholders’ equity on December 31, 2016:

Common stock—$10 par value, 140,000 shares authorized, 60,000 shares issued and outstanding	$	600,000
Paid-in capital in excess of par value, common stock		90,000
Retained earnings		500,000
Total stockholders' equity	$	1,190,000

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

Jan.		1		Purchased 6,000 shares of its own stock at $23 cash per share.
Jan.		5		Directors declared a $2 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 2,300 of its treasury shares at $27 cash per share.
Aug.		22		Sold 3,700 of its treasury shares at $20 cash per share.
Sept.		5		Directors declared a $2 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 $223,000 credit balance (from net income) in the Income Summary account to Retained Earnings. REQUIREMENTS: General Journal tab - Prepare the necessary journal entries. Statement of Retained Earnings tab - Prepare the Statement of Retained Earnings for the Kendall Corporation for the year ended December 31, 2017. Stockholders' Equity tab - Prepare the Stockholders' equity section of Kendall Corporation's December 31, 2017 balance sheet. Impact on Equity tab - For each transaction, indicate the total change in Stockholders' Equity, if any. Verify that total equity, as calculated, agrees with the amount reported on the Stockholders' Equity tab.

Answer 1

Answer:
Requirement 1	Journal Entries
Date	Account title and explanation	Debit	Credit
Jan-01	Treasury Stock	$            1,38,000		(6,000*$23)
	Cash		$             1,38,000
	(To record purchase of its own stock)
Jan-05	Cash dividend	$            1,08,000		((60,000-6,000) shares*$2)
	Dividend payable		$             1,08,000
	(To record declaration of dividend)
Feb-28	Dividend payable	$            1,08,000		((60,000-6,000) shares*$2)
	Cash		$             1,08,000
	(To record payment of dividend)
Jul-06	Cash	$               62,100		(2300*27)
	Treasury Stock		$                52,900	(2300*23)
	Paid-in capital in excess of treasury stock		$                   9,200	(2300*4)
	(To record sale of treasury stock)
Aug-22	Cash	$               74,000		(3700*$20)
	Paid-in capital in excess of treasury stock	$                 9,200			(It cannot be debited in excess of the balance of paid in capital in excess of treasury stock)
	Retained Earning	$                 1,900		(85100-74000-9200)	(The balance loss would be set-off from retained earning)
	Treasury Stock		$                85,100	(3700*23)
	(To record Sale of treasury stock)
Sep-05	Cash dividend	$            1,20,000		(60,000 shares*$2)
	Dividend payable		$             1,20,000
	(To record declaration of dividend)
Oct-28	Dividend payable	$            1,20,000		(60,000 shares*$2)
	Cash		$             1,20,000
	(To record payment of dividend)
Dec-31	Income Summary	$            2,23,000
	Retained Earning		$             2,23,000
	(To close Income summary to retained earning)
Requirement 2	Statement of retained earning
	Beginning balance	$            5,00,000
	Add: Net income	$            2,23,000
	Less: Treasury stock	$                 1,900
	Less: Cash dividend	$            2,28,000	(108,000+120,000)
	Ending Balance	$            4,93,100	(500,000+223,000-1,900-228,000)
Requirement 3	Balance Sheet (Partial)
	Stockholder's Equity
	Paid-in capital
	Common Stock	$            6,00,000
	In excess of par value	$               90,000
	Total paid-in capital	$            6,90,000	(600,000+90,000)
	Retained earning	$            4,93,100
	Total stockholder's Equity	$          11,83,100	(690,000+493,100)