Nav-Go Enterprises Inc. produces aeronautical navigation equipment. The stockhol

Question

Nav-Go Enterprises Inc. produces aeronautical navigation equipment. The stockholders' equity accounts of Nav-Go Enterprises Inc., with balances on January 1, 2014, are as follows: The following selected transactions occurred during the year: Paid cash dividends of $0.06 per share on the common stock. The dividend had been properly recorded when declared on Deceml>er 1 of the preceding fiscal year for $54,320. Sold all of the treasury stock for $6.75 per share. Issued the certificates for the dividend declared on June 14. Purchased 50,000 shares of treasury stock for 16 per share. Declared a $0.08-per-share dividend on common stock. Closed the credit balance of the income summary account, $775,000. Closed the two dividends accounts to Retained Earnings. Enter the January 1 balances in T accounts for the stockholders' equity accounts listed. Paid-In Capital from Sale of Treasury Stock; Stock Dividends Distributable; Stock Dividends; Cash Dividends. Journalize the entries to record the transactions, and post to the eight selected ac-counts. Prepare a retained earnings statement for the year ended December 31, 2014. Prepare the Stockholders' Equity section of the December 31, 2014, balance sheet.

Explanation / Answer

Journal Entries:

STOCK HOLDERS' EQUITY SECTION OF THE DECEMBER 31, 2014, BALANCE SHEET:

Common Stock, stated value $5 $4223000

(Authorised 900000 shares, issued 844600 Shares)

Paid in capital in excess of stated value- common stock $1937500

Retained Earnings $5463432

$11623932

Less: Treasury Stock $300000

$11323932

Date Accounts Title and explanation Debit $ Credit $ Jan 15 Dividend payable 34320 Cash 34320 Mar 15 Cash 324000 Treasury Stocks 288000 Paid in capital in excess of stated value- common stock 36000 (treasury stock sold at $6.75) Apr 13 Cash 1600000 Common Stock, stated value $5 1000000 Paid in capital in excess of stated value- common stock 600000 June 14 Stock Dividend 184500 Common Stock distributable 123000 Paid in capital in excess of stated value- common stock 61500 July 16 Common Stock distributable 123000 Common Stock, stated value $5 123000 Oct. 30 Treasury Stock 300000 Cash 300000 Dec. 30 Cash Dividend 63568 Dividend payable 63569 (on 794600 @$0.08) dec 30 Income 775000 Retained Earnings 775000 Dec 30 Retained Earnings 248068 Cash Dividend 63568 Stock Dividend 184500 RETAINED EARNINGS STATEMENT Opening Balance 4875000 Add: Income 775000 5650000 Less: Cash Dividend 63568 Less: Stock Dividend 123000 Closing Balance as on Dec 31 2014 5463432

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