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(Learning Objectives 2, 3, 4: Account for issuance of stock; show how treasury s

ID: 2460272 • Letter: #

Question

(Learning Objectives 2, 3, 4: Account for issuance of stock; show how treasury stock affects a company; account for dividends) At December 31, 2012, Blumenthal Corporation reported the stockholders’ equity accounts shown here (with dollar amounts in millions, except per-share amounts)

Blumenthal’s 2013 transactions included the following:

a.Net income, $450 million

b.Issuance of 22 million shares of common stock for $14.00 per share

c.Purchase of 9 million shares of treasury stock for $18 million

d.Declaration and payment of cash dividends of $32 million

? Requirement

1.Journalize Blumenthal’s transactions in b, c, and d. Explanations are not required.

Common stock $3.00 par value per share, 2,400 million shares issud.. Capital in excess of par value 7,200 7,200 290 (80) Total stockholders' equity$14,610 Treasury stock, at cost.

Explanation / Answer

(Amount in Millions) Journal Entry Date Particulars Dr Amount Cr Amount (a) Profit & Loss A/c                                                    Dr. $450     To Retained Earnings A/c $450 (Profit Earned during the year transferred to retained earnings) (b) Bank A/c                                                                  Dr. $308    To Common Stock A/c $66    To Capital in excess of par Value $242 (22 Million Shares issued @ $14 per Share) (c) Treasury Stock A/c                                             Dr. $27        To Bank A/c $18        To Capital in excess of par Value A/c            $9 (9 Million Shares purchased) (d) Dividend A/c                                                       Dr. $32      To Bank A/c $32 (dividend paid during the year)