During 2012, Patrick completed the following selected transactions. Feb. 6 - Dis

Question

During 2012, Patrick completed the following selected transactions.

Feb. 6 - Distributed a 10% stock dividend on the common stock. The market value of Patrick's stock was $26 per share.

July 29 - Purchased 2,000 shares of treasury stock at $26 per share.

Nov. 27 - Declared a $.30 per share cash dividend on the 20,000 shares of common stock oustanding. The date of record is December 17, and the payment date is January 7, 2013.

Dec. 31 - Closed the $86,000 net income to Retained Earnings.

Requirements -

1. Record the transaction in the general journal.

2. Prepare the retained earnings statment for the year ended December 31, 2012.

3. Prepare the stockholders' equity section of the balance sheet at December 31, 2012. (Use the parentheses or a minus sign for numbers to be subtracted.)

Explanation / Answer

1. Journal entries Date Account Details/Description Debits Credits 6-Feb Retained earnings a/c Dr (2,000 shares x $26) $    52,000 Common stock a/c (2000 x $15) $   30,000 Paid in capital in excess of par-Common $   22,000 (being the distribution of 10% common stock dividend: 20,000 shares x 10% = 2000 shares) 29-Jul Treasury stock a/c Dr (2,000 shares x $26) $    52,000 Cash a/c $   52,000 (Being the purchase of treasury stock) 27-Nov Retained earnings a/c Dr (20,000 x $.30) $      6,000 Dividends payable a/c $     6,000 (being the declaration of dividend) 31-Dec Income summary a/c Dr $    86,000 Retained earnings a/c $   86,000 (Being the closure of net income to retained earnings) 2. Statement of Retained earnings for the year ended December 31, 2012 Retained earnings, as on January 1, 2012 $ 158,000 Add: Net income for the year 2012 $    86,000 $ 244,000 Less: Stock dividend distributed $52,000            Cash dividend declared $      6,000 Retained earnings, as on December 31, 2012 $ 186,000 3. Stockholder's Equity section of the balance sheet at December 31, 2012 Paid-in Capital: Capital Stock: Common Stock, $15 par, 300,000 shares authorized; 22,000 shares issued & 20,000 shares outstanding $ 330,000 Additional paid in capital: Paid in capital in excess of par - Common stock $ 332,000 Total Paid in capital $ 662,000 Retained earnings $ 186,000 Less: Treasury stock (2,000 shares at $26 per share) $ (52,000) Total stockholder's equity $ 796,000

Related Questions

Navigate

• Browse (All)
• Browse D
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.