Alexander Corporation reports the following components of stockholders’ equity o

Question

Alexander Corporation reports the following components of stockholders’ equity on December 31, 2016: Common stock—$25 par value, 70,000 shares authorized, 42,000 shares issued and outstanding $ 1,050,000 Paid-in capital in excess of par value, common stock 84,000 Retained earnings 382,000 Total stockholders’ equity $ 1,516,000 In year 2017, the following transactions affected its stockholders’ equity accounts. Jan. 2 Purchased 4,200 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 1,680 of its treasury shares at $30 cash per share. Aug. 27 Sold 2,100 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 $64,000 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.

Explanation / Answer

1)

2)

Statement of retained earning

for the period ended 31 december 2017

3)

stockholders equity

for the period ended 31 december 2017

**if treasury stock is sold below cost ,the loss is first adjusted to paid in capital earned from sale of treasury stock and then from paid in capital earned from common stock   and then to from retained earning

Date Account title Debit credit jan 2 Treasury stock 105000 cash (4200*25) 105000 jan 7 cash dividend 56700 Dividend payable [(42000-4200)*1.5] 56700 Feb 28 Dividend payable 56700 cash 56700 July 9 cash [1680*30] 50400 Treasury stock [1680*25] 42000 Paid-in capital in excess of COSt -treasury stock 8400 aug 27 cash [ 2100*20] 42000 Paid-in capital in excess of COSt -treasury stock 8400 Paid-in capital in excess of par -common stock 2100 TReasury stock [2100*25] 52500 sep 9 cash dividend 83160 dividend payable [(42000-4200+1680+2100)*2] 83160 oct 22 dividend payable 83160 cash 83160 dec 31 Income summary 64000 Retained earning 64000 Retained earning 139860 cash dividend 139860 [to close cash dividend]

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