Question

At the beginning of 2020, Braun Corporation had the following stockholders’ equity balances in its general ledger:
Common Stock, $10 Par Value $400,000

Paid-In Capital in Excess of Par: Common $600,000

Paid-In Capital, Treasury Stock $5,000

Paid-In Capital, Stock Options    $200,000

Retained Earnings    $1,200,000

Treasury Stock (5,000 shares) $(100,000)

_____________________________________

Total Stockholders’ Equity $2,305,000

The paid-in capital from stock options relates to options granted on 1/1/12 to the CEO as incentive compensation. As of 1/1/20, the remaining expected benefit period is four years; expense has been and will be recorded evenly over the benefit period.
The following events were among the many occurring in 2020:
a. January 2: Purchased 5,000 shares of its common stock for $16 per share. Braun uses the cost method of accounting for treasury stock transactions.
b. February 1: Declared and distributed a 10% stock dividend on common stock outstanding when the market price of the stock was $13 per share.
c. April 1: Issued 20,000 shares of $50 par, noncumulative, convertible 6% preferred stock for $60 per share, where one share of preferred stock is convertible into two shares of common stock.
d. July 1: 2,000 shares of treasury stock that had been purchased in a prior year for $21 per share were re-issued for $12 per share.
e. August 1: Holders of 8,000 shares of the preferred stock converted their shares into common stock when the market value of the common stock was $22 per share. Braun uses the book value method of accounting for conversions.
f. October 1: Declared and paid a cash dividend of $3 per share on the outstanding common stock.
g. November 1: Corrected an error that was made several years ago, when land that had been purchased for $60,000 was inadvertently expensed.
h. December 1: Declared and distributed a property dividend of land to preferred shareholders. The land had a fair value of $75,000 and a carrying value of $80,000.
i. December 31: Recorded 2020 compensation expense related to the stock options.

The 2020 Final Net Income, including the effects of any net income items listed above (and the 2020 tax effects on net income items), was $1,000,000. There were 500,000 shares authorized for both preferred and common stock.

Required: 1. All journal entries for the items (a. through i.) above.
2. The 12/31/20 Stockholders’ Equity section.

Answer 1

Requirment 1

S.No	Particulars	Debit	Credit
2nd Jan	Treasury Stock A/c(5000 share x $16)	80000
	To Cash		80000
	(purchase Share @ $16 per share)
b.! Feb	Retained earning(3000 x $13)	39000
	To Common Stock		30000
	To APIC-excess or par		9000
	(10% stock Dividend For Share outstanding)
1-Apr	Cash(20000 share x $60)	1200000
	To 6% Preferred Shares(20000 share x $50)		1000000
	To APIC-excess or Par(20000 share x$10)		200000
	(Being Share issued at premium)
1-Jul	Cash A/c(2000 shares x $12)	24000
	PIC- treasury Stock A/c(2000 x $ 9)	5000
	Reatained earning A/c	13000
	To treasury Stock A/c(2000 x $21)		42000
	( 2000 share resell at $12 per share, purchased @$ 21) Loss on resell transferred up balance available in PIC treasury Stock A/c
1 Augest	6% Preferred Stock A/c(8000 shares x $50)	400000
	To Common Stock(16000 shares x $10)		160000
	To APIC- excess or par		240000
	(book Value conversion Hence ignored mkt value of both the stock) conversion rate 1:2, 8000 shares converted into 16000 shares
1-Oct	Retained earning A/c	153000
	To Dividend Declared		153000
	($ 3 Per share Cash Dividend to outstanding common stock, 40000-10000+2000+3000+16000= 51000 shares)
	Dividend Declared	153000
	To Cash		153000
	(Being Dividend Paid)
1-Nov	Land A/c	60000
	To Prior period Item a/c		60000
	(Prior year Mistake Corrected )
1-Dec	Loss on Value of Assets	5000
	Dividend Paid(preferred Stock)	75000
	To Land A/c		80000
	(Being land mkt Value $ 75000 distributed as dividend has Carrying value $80000)
	Retained earning a/c	75000
	To Dividend Paid		75000
	dividend Declared on preferred Stock)
31-Dec	Stock Option Compensation Exp	25000
	To PIC Stock option		25000
	( Stock option expense out, 200000/8=25000) Note:PIC stock option balance is given in extract of the balance sheet as on 31/12/2019. Option right was started on 1/01/2012 and on 1/1/2020, 4 years are remaining it means it expired on 31/12/2023. In past we have charged the expenses evenly on year to year basis which amounting to $25000($200000/8 years). Now for current year it will also be $ 25000

Requirement 2

	Stake Holder Equity			Amount
	Common Stock $10 par value, 500000 shares authorised, 59000 issued, 51000 outstanding		$     590,000.00
	6% Preferred Stock $ 50, 500000 authorised, 12000 issued & outstanding		$     600,000.00	$      1,190,000.00
	PIC-excess or par common(600000+9000+240000)		$     849,000.00
	PIC-excess or par Preferred		$     200,000.00	$      1,049,000.00
	Retained earning A/c			$      1,920,000.00
				$      4,159,000.00
	Less: treasury Stock A/c(8000 shares)			$          138,000.00
	($100000+80000-42000)
	Stake Holder Equity			$      4,021,000.00

	Retained earning A/c
Particulars	Amount	Particulars	Amount
To Common Stock	30000	By Balance B/d	1200000
To APIC excess or par	9000	By Net profit	1000000
To treasury Stock A/c	13000
To Dividend	153000
To Dividend	75000
To Balance C/d	1920000
	2200000		2200000

Thanks