Question

Morrow Enterprises Inc. manufactures bathroom fixtures. The stockholders’ equity accounts of Morrow Enterprises Inc., with balances on January 1, 20Y5, are as follows:

Common stock, $20 stated value (500,000 shares authorized, 383,000 shares issued)$7,660,000

Paid-In Capital in Excess of Stated Value—Common Stock957,500

Retained Earnings35,012,000

Treasury Stock (25,700 shares, at a cost of $18 per share)462,600

The following selected transactions occurred during the year:

Jan.22Paid cash dividends of $0.06 per share on the common stock. The dividend had been properly recorded when declared on December 1 of the preceding fiscal year for $21,438.

Apr.10Issued 77,000 shares of common stock for $23 per share.

Jun.6Sold all of the treasury stock for $27 per share.

Jul.5Declared a 3% stock dividend on common stock, to be capitalized at the market price of the stock, which is $26 per share.

Aug.15Issued the certificates for the dividend declared on July 5.

Nov.23Purchased 33,000 shares of treasury stock for $20 per share.

Dec.28Declared a $0.08-per-share dividend on common stock.

31Closed the two dividends accounts to Retained Earnings.

A. Enter the January 1 balances in T accounts for the stockholders’ equity accounts listed.

B. Journalize the entries to record the transactions, and post to the eight selected accounts. No post ref is required in the journal. Refer to the Chart of Accounts for exact wording of account titles.

C. Prepare a retained earnings statement for the year ended December 31, 20Y5. Assume that Morrow Enterprises had net income for the year ended December 31, 20Y5, of $1,162,500. For those boxes in which you must enter subtractive or negative numbers use a minus sign. The word “Less” is not required.

*D. Prepare the Stockholders’ Equity section of the December 31, 20Y5, balance sheet. For those boxes in which you must enter subtractive or negative numbers use a minus sign.*

*Refer to the list of Amount Descriptions provided for the exact wording of the answer choices for text entries.

Answer 1

A&B.	Date	Account					Debit	Credit
	Jan 22.	Cash dividend payable					21438
		Cash						21438
		(Paid cash dividends)
	Apr 10.	Cash				(77000*23)	1771000
		Common stock				(77000*20)		1540000
		Paid-In Capital in Excess of Stated Value-Common Stock						231000
		(balancing figure)
		( Issued 77,000 shares)
	June 6.	Cash				(25700*27)	693900
		Treasury stock						462600
		Paid-In Capital from Sale of Treasury Stock				(Plug)		231300
		(Sold all of the treasury stock)
	July 5.	Stock dividends				(Note:1)	358800
		Stock dividends distributable						276000
		Paid-In Capital in Excess of Stated Value-Common Stock						82800
		(Declared a 4% Stock dividend on common stock)
	Aug 15.	Stock dividends distributable					276000
		Common stock						276000
		(Issued shares of stock for the dividend declared on July 5)
	Nov 23.	Treasury stock				(33000*20)	660000
		Cash						660000
		( Purchased 33,000 shares of treasury stock)
	Dec 28.	Cash dividend				(Note:2)	35264
		Cash dividend payable						35264
		(Declared a $0.08-per-share dividend)
	Dec 31.	Retained earnings					394064
		Stock dividends						358800
		Cash dividend						35264
		(Closed the two dividends accounts)
	Dec 31.	Income summary					1162500
		Retained earnings						1162500
		(Closed the credit balance of the income summary account)
	Note:1-Stock dividend on July 5.
	Common stock shares outstanding on July 5:
	Beginnning balance
	Common stock				383000
	Trasury stock				-25700	357300
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