Question

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

Common stock—$25 par value, 50,000 shares authorized, 34,000 shares issued and outstanding	$	850,000
Paid-in capital in excess of par value, common stock		68,000
Retained earnings		354,000
Total stockholders’ equity	$	1,272,000

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

Jan.		2		Purchased 3,400 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 1,360 of its treasury shares at $30 cash per share.
Aug.		27		Sold 1,700 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 $56,000 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

1
Date	General Journal	Debit	Credit
2-Jan	Treasury stock, common	85,000		=3400*25
	Cash		85,000
7-Jan	Retained earnings	45,900		=(34000-3400)*1.5
	Common dividend payable		45,900
28-Feb	Common dividend payable	45,900
	Cash		45,900
9-Jul	Cash	40,800		=1360*30
	Treasury stock, common		34,000	=1360*25
	Paid-in capital, treasury stock		6,800
27-Aug	Cash	34,000		=1700*20
	Paid-in capital, treasury stock	6,800
	Retained earnings	1,700
	Treasury stock, common		42,500	=1700*25
9-Sep	Retained earnings	67,320		=(34000-3400+1360+1700)*2
	Common dividend payable		67,320
22-Oct	Common dividend payable	67,320
	Cash		67,320
31-Dec	Income summary	56,000
	Retained earnings		56,000
2
	ALEXANDER CORPORATION
	Statement of Retained Earnings
	For Year Ended December 31, 2017
	Retained earnings, December 31, 2016	354,000
	Add: Net income	56,000
		410,000
	Less: Cash dividends declared	-113,220
	Less: Treasury stock reissuances	-1,700
	Retained earnings, December 31, 2017	295080
3
	ALEXANDER CORPORATION
	Stockholders’ Equity Section of the Balance Sheet
	December 31, 2017
	Common stock - $25 par value	850,000
	Paid-in capital in excess of par value, common stock	68,000
	Retained earnings	295,080
	Less cost of treasury stock	-8,500
	Total stockholders’ equity	1,204,580