Anonymous
Anonymous asked in Business & FinanceCorporations · 7 years ago

Problem 13-2A Cash dividends, treasury stock, and statement of retained earnings PLEASE HELP ME!!!?

I am having a hard time calculating the answers, please show the working outs thoroughly please

Context Corporation reports the following components of stockholders’ equity on December 31, 2011.

Common stock—$20 par value, 100,000 shares authorized,

55,000 shares issued and outstanding $1,100,000

Paid-in capital in excess of par value, common stock $70,000

Retained earnings $400,000

Total stockholders' equity $1,570,000

In year 2012, the following transactions affected its stockholders’ equity accounts.

Jan.1 Purchased 5,000 shares of its own stock at $20 cash per share.

Jan.5 Directors declared a $4 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 1,875 of its treasury shares at $24 cash per share.

Aug.22 Sold 3,125 of its treasury shares at $17 cash per share.

Sept.5 Directors declared a $4 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 $408,000 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 2012.

2. Prepare a statement of retained earnings for the year ended December 31, 2012.

3. Prepare the stockholders' equity section of the company’s balance sheet as of December 31, 2010.

3 Answers

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  • JKRB
    Lv 7
    7 years ago
    Best Answer

    Jan.1 Purchased 5,000 shares of its own stock at $20 cash per share.

    5,000 x 20 = 100,000

    Dr Treasury Stock 100,000

    Cr Cash 100,000

    *There are now 55,000 shares of common stock issued, 50,000 shares outstanding.

    Jan.5 Directors declared a $4 per share cash dividend payable on Feb. 28 to the Feb. 5 stockholders of record.

    50,000 x 4 = 200,000

    Dr Cash Dividends 200,000

    Cr Dividends Payable 200,000

    Feb.28 Paid the dividend declared on January 5.

    Dr Dividends Payable 200,000

    Cr Cash 200,000

    July 6 Sold 1,875 of its treasury shares at $24 cash per share.

    1,875 x 24 = $45,000 total sales price

    1,875 x 20 = $37,500 cost

    Dr Cash 45,000

    Cr Common Treasury Stock 37.500

    Cr Paid-in Capital on Sale of Treasury Stock 7,500

    *There are now 55,000 shares of common stock issued, 51,875 shares outstanding.

    Aug.22 Sold 3,125 of its treasury shares at $17 cash per share.

    3,125 x 17 = $53,125 total sales price

    3,125 x 20 = $62,500 total cost

    Dr Cash 53,125

    Cr Paid-in Capital on Sale of Treasury Stock 7,500

    Cr Retained Earnings 1,875

    Cr Common Treasury Stock 62,500

    *Since there was only $7,500 in the excess treasury stock paid-in capital account, the difference is taken out of retained earnings.

    There are now 55,000 shares of common stock issued AND outstanding.

    Sept.5 Directors declared a $4 per share cash dividend payable on October 28 to the September 25 stockholders of record.

    55,000 x 4 = $220,000

    Dr Cash Dividends 220,000

    Cr Dividends Payable 220,000

    Oct.28 Paid the dividend declared on September 5.

    Dr Dividends Payable 220,000

    Cr Cash 220,000

    Dec.31 Closed the $408,000 credit balance (from net income) in the Income Summary account to Retained Earnings.

    Dr Income Summary 408,000

    Cr Retained Earnings 408,000

    2. Prepare a statement of retained earnings for the year ended December 31, 2012.

    Retained earnings, January 1, 2012 . . . . . . $400,000

    Net Income . . . . . . . . . . . . . . . . . . . . . . . . 408,000. . . $808,000

    Less: Dividends . . . . . . . . . . . . . . . . . . . . .420,000

    Less: Sale of Treasury Stock Deductions . . . . 1,875

    Total Deductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 421,875

    Retained earnings, December 31, 2012 . . . . . . . . . . . . . $386,125

    3. Prepare the stockholders' equity section of the company’s balance sheet as of December 31, 2010.

    Common stock—$20 par value, 100,000 shares authorized,

    55,000 shares issued and outstanding . . . . . . . . . . . . . . . . $1,100,000

    Paid-in capital in excess of par value, common stock . . . . . . . . .70,000

    Total Paid-in Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,170,000

    Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 386,125

    Total stockholders' equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$1,556,125

    Source(s): Accounting Fan
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    5 years ago

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  • 4 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

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