Alexander Corporation reports the following components of stockholders’ equity o

Question

Alexander Corporation reports the following components of stockholders’ equity on December 31, 2015: Common stock—$25 par value, 60,000 shares authorized, 35,000 shares issued and outstanding $ 875,000 Paid-in capital in excess of par value, common stock 70,000 Retained earnings 357,000 Total stockholders’ equity $ 1,302,000 In year 2016, the following transactions affected its stockholders’ equity accounts. Jan. 2 Purchased 3,500 shares of its own stock at $25 cash per share. Jan. 7 Directors declared a $1.50 per share cash dividend payable on Feb. 28 to the Feb. 9 stockholders of record. Feb. 28 Paid the dividend declared on January 7. July 9 Sold 1,400 of its treasury shares at $30 cash per share. Aug. 27 Sold 1,750 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 $57,000 credit balance (from net income) in the Income Summary account to Retained Earnings. Prepare a statement of retained earnings for the year ended December 31, 2016 Prepare the stockholders’ equity section of the company’s balance sheet as of December 31, 2016.

Explanation / Answer

Statement of retained earnings for the year ending Dec 31,2016

Balance on Jan I, 2016 = 357000

Net income 57000

Less dividends = 116550

_______________________________

Balance on Dec 31,2016 = 297450

Dividend = (35000-3500)*1.5 +(31500+1400+1750)*2

= 116550

2) shareholder equity

Common stock-25 per share, 60000 share authorized, 34650 shares issued, 350 share in treasure =866250

Addition to paid up capital =68250

Retained earnings = 297450

------------------------------------------------------------

1231950

Less cost of treasure stock =8750

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Total stockholders equity = 1223200

Explanation

Addition to paid in capital = 70000+7000-8750

=68250

7000 are from 1400 share issued at 30

8250 are from 1750 share issued at 20

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