Question

Exercise 11-18 Cash dividends, treasury stock, and statement of retained earnings LO C3, P2, P3

Alexander Corporation reports the following components of stockholders’ equity on December 31, 2016:

Common stock—$25 par value, 50,000 shares authorized, 30,000 shares issued and outstanding	$	750,000
Paid-in capital in excess of par value, common stock		50,000
Retained earnings		340,000
Total stockholders’ equity	$	1,140,000

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

Jan.		2		Purchased 3,000 shares of its own stock at $25 cash per share.
Jan.		7		Directors declared a $1.50 per share cash dividend payable on February 28 to the February 9 stockholders of record.
Feb.		28		Paid the dividend declared on January 7.
July		9		Sold 1,200 of its treasury shares at $30 cash per share.
Aug.		27		Sold 1,500 of its treasury shares at $20 cash per share.
Sept.		9		Directors declared a $2 per share cash dividend payable on October 22 to the September 23 stockholders of record.
Oct.		22		Paid the dividend declared on September 9.
Dec.		31		Closed the $52,000 credit balance (from net income) in the Income Summary account to Retained Earnings.

Required:
1. Prepare journal entries to record each of these transactions for 2017.
2. Prepare a statement of retained earnings for the year ended December 31, 2017.
3. Prepare the stockholders’ equity section of the company’s balance sheet as of December 31, 2017.

Answer 1