Question

 

Your examination of the Preferred Stock and Common Stock accounts reveals that the amounts shown correctly state the total par value of the issued capital stock. The Retained Earnings account contains the accumulated earnings of the company, with the exception of any items of retained earnings that were inappropriately debited or credited to the Capital Surplus account.

Required:

1.	Prepare whatever journal entries are necessary to eliminate the Capital Surplus account and to correct Hubbard’s shareholders’ equity accounts.

 

Answer 1

DATE	ACCOUNT TITLE	DEBIT	CREDIT
Dec. 31, 2019	Treasury stock	$5600
	Retained earnings	$77100
	Additional paid-in capital on preferred stock		$2000
	Additional paid-in capital on common stock		$27700
	Unrealized Capital from Donation of Land		$16900
	Capital surplus		$36100
	(To eliminate the Capital Surplus account and to correct Hubbard’s shareholders’ equity accounts)

Particulars	Amount
Additional paid-in capital on preferred stock	$2000
Additional paid-in capital on common stock	$27700
Unrealized Capital from Donation of Land	$16900
Capital surplus	$36100
Less: Treasury stock	$(5600)
Retained earnings	$77100