On December 31, 2014, Rayco Inc. had the following balances (all balances are no
ID: 2484997 • Letter: O
Question
On December 31, 2014, Rayco Inc. had the following balances (all balances are normal):
Amount
Preferred Stock, ($100 par value, 5% noncumulative, 50,000 shares authorized, 10,000 shares issued and outstanding)
$1,000,000
Common Stock ($10 par value, 200,000 shares authorized, 100,000 shares issued and outstanding)
$1,000,000
The following events occurred during 2014 and were not recorded:
On January 1, Rayco declared a 5% stock dividend on its common stock when the market value of the common stock was $15 per share.
Stock dividends were distributed on January 31 to shareholders as of January 25.
On February 15, Rayco reacquired 1,000 shares of common stock for $20 each.
On March 31, Rayco reissued 250 shares of treasury stock for $25 each.
On July 1, Rayco reissued 500 shares of treasury stock for $16 each.
On October 1, Rayco declared full year dividends for preferred stock (see outstanding shares in table above).
Then, paid preferred shareholders on October 15
On October 1, Rayco also declared $1.50 cash dividends for the 104,750 remaining common outstanding shares.
Then, paid common shareholders on October 15.
On December 15, Rayco split common stock 2 shares for 1.
Requirements:
Prepare journal entries for the transactions listed above.
Prepare a Stockholders' section of a classified balance sheet as of December 31, 2014 for the information given below:
8% Preferred stock, $100 parvalue, 10,000 sharesauthorized, 5,000 sharesissued and outstanding.
Common stock, no par, $2stated value, 500,000 sharesauthorized, 204,000 sharesissued and outstanding
Additional paid-in capital:
Preferred stock in excess of par value is $34,000
Common stock in excess of stated value is $437,000
AccountsAmount
Preferred Stock, ($100 par value, 5% noncumulative, 50,000 shares authorized, 10,000 shares issued and outstanding)
$1,000,000
Common Stock ($10 par value, 200,000 shares authorized, 100,000 shares issued and outstanding)
$1,000,000
Explanation / Answer
Answer: Journal entry:
Jan. 1
Retained Earnings (5,000 shares x $15) A/C Dr. $ 75,000
To Common Stock (5,000 shares x $10) A/C $ 50,000
To Paid in cap in excess of par -CS A/C $ 25,000
Jan. 31
Common Stock Distribution A/C Dr. $ 50,000
To Common Stock A/C $ 50,000
Feb. 15
Treasury Stock (1000 x $20 share) A/C Dr. $ 20,000
To Cash A/C $ 20,000
Mar. 31
Cash (250 x $25 share) A/C Dr. $ 6,250
To Treasury Stock (250 x $20 share) A/C $ 5,000
To Paid in cap in excess of par -TS A/C $ 1,250
7/1/2015
Cash (500 x $16 share) A/C Dr. $ 8,000
Paid in cap in excess of par -ts A/C Dr. $ 1,250
Retained earnings A/C Dr. $ 750
To Treasury Stock (500 x $20 share) A/C $ 10,000
Oct. 1
Retained Earnings ( 50,000 + ($104,750 x $1.50 ) A/C Dr. $ 201,875
To Dividends Payable A/C $ 201,875
Oct. 15
Dividends Payable A/C Dr. $ 201,875
To Cash A/C $ 201,875
Dec. 15 Memo: Common Stock Split 2 for 1, par $5 share, 210,000 issued and 209,500 outstanding
Dec. 31
Income Summary A/C Dr. $275000
To Retained earnings A/C $275000
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