Accounting HELP?! Cash dividends, treasury stock, and statement of retained earnings.?

I am completely lost on this. I have several problems on the same lines as this one but if someone could help me figure this one out maybe I can piece in the slots??? Thanks everyone <3

Context Corporation reports the following components of stockholders’ equity on December 31, 2005:

Common stock—$10 par value, 50,000 shares authorized,

20,000 shares issued and outstanding . . . . . . . . . . . . . . . . . . . . . $200,000

Contributed capital in excess of par value, common stock . . . . . . . . 30,000

Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135,000

Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $365,000

In year 2006, the following transactions affected its stockholders’ equity accounts:

Jan. 1 Purchased 2,000 shares of its own stock at $20 cash per share.

Jan. 5 Directors declared a $2 per share cash dividend payable on Feb. 28 to the Feb. 5 stockholders of record.

Feb. 28 Paid the dividend declared on January 5.

July 6 Sold 750 of its treasury shares at $24 cash per share.

Aug. 22 Sold 1,250 of its treasury shares at $17 cash per share.

Sept. 5 Directors declared a $2 per share cash dividend payable on October 28 to the September

25 stockholders of record.

Oct. 28 Paid the dividend declared on September 5.

Dec. 31 Closed the $194,000 credit balance (from net income) in the Income Summary account to

Retained Earnings.

Required

1. Prepare journal entries to record these transactions for 2006.

2. Prepare a statement of retained earnings for the year ended December 31, 2006.

3. Prepare the stockholders’ equity section of the company’s balance sheet as of December 31, 2006.

Cash dividends, treasury stock, and statement of retained earnings

C2 C5 P3 P5 Check (2) Retained earnings, Dec. 31, 2006,

6 Answers

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  • JKRB
    Lv 7
    8 years ago
    Best Answer

    Jan. 1 Purchased 2,000 shares of its own stock at $20 cash per share.

    Dr Treasury Stock 40,000

    Cr Cash 40,000

    There are now 18,000 shares of common stock outstanding

    Jan. 5 Directors declared a $2 per share cash dividend payable on Feb. 28 to the Feb. 5 stockholders of record.

    Dr Retained Earnings 36,000

    Cr Dividends Payable 36,000

    Feb. 28 Paid the dividend declared on January 5.

    Dr Dividends Payable 36,000

    Cr Cash 36,000

    July 6 Sold 750 of its treasury shares at $24 cash per share.

    Dr Cash 18,000

    Cr Common Treasury Stock 15,000 (750 x $20 purchase price)

    Cr Paid-in Capital from Sale of Treasury Stock 3,000

    There are now 18,750 shares of common stock outstanding

    Aug. 22 Sold 1,250 of its treasury shares at $17 cash per share.

    Dr Cash 21,250

    Dr Paid-in Capital from Sale of Treasury Stock 3,000

    Dr Retained Earnings 750

    Cr Common Treasury Stock 25,000 (1,250 x $20 purchase price)

    There are now 20,000 shares of common stock outstanding.

    *Note: There is a debit to retained earnings because the "paid-in" account for treasury stock only had $3,000. The remainder is covered by retained earnings.

    Sept. 5 Directors declared a $2 per share cash dividend payable on October 28 to the September

    25 stockholders of record.

    Dr Retained Earnings 40,000

    Cr Dividends Payable 40,000

    Oct. 28 Paid the dividend declared on September 5.

    Dr Dividends Payable 40,000

    Cr Cash 40,000

    Dec. 31 Closed the $194,000 credit balance (from net income) in the Income Summary account to

    Retained Earnings.

    Dr Income Summary 194,000

    Cr Retained Earnings 194,000

    2. Prepare a statement of retained earnings for the year ended December 31, 2006.

    Retained Earnings, Dec. 31, 2005 . . . $135,000

    Net Income . . . . . . . . . . . . . . . . . . . . 194,000 . . . . . . . $329,000

    Less:

    Dividends . . . . . . . . . . . . . . . . . . . . . . 76,000

    Sale of Treasury Stock . . . . . . . . . . . . . . .750 . . . . . . . . . 76,750

    Retained Earnings, Dec. 31, 2006 . . . . . . . . . . . . . . . . . $252,250

    3. Prepare the stockholders’ equity section of the company’s balance sheet as of December 31, 2006.

    Common stock—$10 par value, 50,000 shares authorized,

    20,000 shares issued and outstanding . . . . . . . . . . . . . . . . . . . . . $200,000

    Contributed capital in excess of par value, common stock . . . . . . . . . 30,000

    Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .252,250

    Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $482,250

    Source(s): Accounting Fan
    • Brit6 years agoReport

      Hello! I'm working on the same problem and was wondering where you got the 36,000 January 5th and February 28. I can not seem to figure it out. Just let me know!
      Thanks

  • 4 years ago

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    RE:

    Accounting HELP?! Cash dividends, treasury stock, and statement of retained earnings.?

    I am completely lost on this. I have several problems on the same lines as this one but if someone could help me figure this one out maybe I can piece in the slots??? Thanks everyone &lt;3

    Context Corporation reports the following components of stockholders’ equity on December 31,...

    Source(s): accounting cash dividends treasury stock statement retained earnings: https://tr.im/YRsmE
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  • 6 years ago

    Hello! I'm working on the same problem and was wondering where you got the 36,000 January 5th and February 28. I can not seem to figure it out. Just let me know! Thanks

    • sastbmabs6 years agoReport

      (50,000-2,000)=48000
      -(50,000-20,000)=30000
      48000-30000=18000*2=36000

  • 3 years ago

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