Journalize transactions, post, and prepare a stockholders \' equity section; cal

Question

Journalize transactions, post, and prepare a stockholders ' equity section; calculate ratios. The stockholders' equity accounts of Warden Corporation on January 1, 2014, were as follows. Preferred Stock (9%, $50 par cumulative, 10,000 shares authorized) $ 200,000 Common Stock ($1 stated value, 2,000,000 shares authorized) 1,000,000 Paid-in Capital in Excess of Par Value-Preferred Stock 16,000 Paid-in Capital in Excess of Stated Value-Common Stock 1,400,000 Retained Earnings 1,716,000 Treasury Stock (8,000 common shares) 20,000 During 2014 the corporation had these transactions and events pertaining to its stockholders' equity. Feb. 1 Issued 20,000 shares of common stock for $160,000. Nov. 10 Purchased 4,000 shares of common stock for the treasury at a cost of $16,000. Nov. 15 Declared a 9% cash dividend on preferred stock, payable December 15. Dec. 1 Declared a $0.30 per share cash dividend to common stockholders of record on December 15, payable December 31, 2014. Dec. 15 Paid the dividend declared on November 15. 31 Determined that net income for the year was $408,000. The market price of the common stock on this date was $5 per share. Paid the dividend declared on December 1. Instruction Journalize the transactions. (Include entries to close net income and dividends to Retained Earnings.) Enter the beginning balances in the accounts, and post the journal entries to the stockholders' equity accounts. (Use T-accounts.) prepare the stockholders' equity section of the balance sheet at December 31, 2014. Tôt. paid-in capital $2,776,000 4. Calculate the payout ratio, earnings per share, and return on common stockholders' equity.

Explanation / Answer

Journal Debit Credit cash       160,000 Common stock                 20,000 paidin capital in excess of stated value               140,000 Treasury stock          16,000 cash                 16,000 Dividend          18,000 Dividend payable                 18,000 Dividend 304800 Dividend payable               304,800 (1000000+20000-4000)=1016000 shares Dividend payable          18,000 cash                 18,000 Dividend payable       304,800 cash               304,800 Stock holders Equity account: Equity Excess of par Retained earnings Total opening balance    1,000,000           1,400,000 1716000    4,116,000 issued          20,000               140,000       160,000 Treaury stock       (12,000)               (24,000)       (36,000) net income 408000       408,000 Dividend                        (322,800)     (322,800)    1,008,000           1,516,000                       1,801,200    4,325,200 EPS: Net income       408,000 less: Preference dividend paid          18,000 income for equity       390,000 Share outstanding    1,016,000 EPS              0.38 equity    1,008,000 ROE 38.69% payout(DPS/EPS) 78.2%

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