Exercise 4-3 Stockholders’ equity in TransWorld Inc. on December 31, 2010, is sh
ID: 2581008 • Letter: E
Question
Exercise 4-3
Stockholders’ equity in TransWorld Inc. on December 31, 2010, is shown below:
Common stock: 60,000 authorized shares, par
value of $15, 25,000 shares issued and outstanding...........................
$375,000
Paid-in capital in excess of par value, common stock.........................
90,000
Retained earnings.............................................................................
430,000
Total equity.......................................................................................
895,000
Stockholder equity accounts were affected by the following transactions in 2011:
Jan 1
TransWorld purchased 2,000 treasury shares at $24/share.
Jan 7
Declared a $3/share dividend, payable on Feb 15 to the Feb 28 stockholders of record.
Feb 15
Paid the dividend (Jan 7 declaration).
May 7
Sold 800 of treasury shares for cash at $27/share.
Aug 15
Sold 1200 of treasury shares for cash at $21/share.
Sep 20
Declared a $3/share dividend, payable on Oct 15 to the Sep 30 stockholders of record.
Oct 15
Paid the dividend (Sep 20 declaration).
Dec 31
Closed the credit balance of $188,000 (from net income) in the Retained Earnings Income Summary account.
1.Use the information provided to prepare the following:
a.Journal entries for the 2011 transactions.
b.December 31, 2011, retained earnings statement.
TRANSWORLD INC
Statement of Retained Earnings
For Year Ended December 31, 2011
[Create your retained earnings statement here.]
c.For distinguished performance, prepare the investors’ equity section of TransWorld’s December 31, 2011, balance sheet.
TRANSWORLD INC
Stockholders’ Equity Section of the Balance Sheet
December 31, 2011
[Create your balance sheet here.]
Common stock: 60,000 authorized shares, par
value of $15, 25,000 shares issued and outstanding...........................
$375,000
Paid-in capital in excess of par value, common stock.........................
90,000
Retained earnings.............................................................................
430,000
Total equity.......................................................................................
895,000
Explanation / Answer
SOLUTION
Date Accounts title and Explanations Debit ($) Credit ($) Jan.1 Treasury Stock, common stock 48,000 Cash (2,000 *$24) 48,000 (Purchased Treasury stock) Jan.7 Retained Earnings 69,000 Common dividend payable (23,000*$3) 69,000 (Declared $3 dividend on 23,000 shares outstanding) Feb 15 Common dividend payable 69,000 Cash 69,000 (Paid the cash dividend) May 7 Cash (800 * $27) 21,600 Treasury Stock, common (800 *24) 19,200 Paid in Capital. Treasury Stock(800 *3) 2,400 (Reissuesd treasury stock) Aug. 15 Cash (1,200 * $21) 25,200 Paid in Capital. Treasury stock 2,400 Retained Earnings 4,800 Treasury Stock common (1,200 *27) 32,400 (Reissuesd treasury stock) Sep.20 Retained Earning 75,000 Common Dividend Payable (25,000 *$3) 75,000 (Declared $3 dividend on 25,000 shares outstanding) Oct.15 Common Dividend Payable 75,000 Cash 75,000 (Paid the cash dividend) Dec.31 Income Summary 188,000 Retained Earnings 188,000 (Closed Income summary account)Related Questions
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