Exercise 4-3 Stockholders’ equity in TransWorld Inc. on December 31, 2010, is sh
ID: 2581189 • 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:
TRANSWORLD INC
Statement of Retained Earnings
For Year Ended December 31, 2011
[Create your retained earnings statement here.]
2. 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
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
7-Jan Cash dividend (25,000-2000 shares)*3= 69000 7-May Cash (800*27) 21600 Treasury stock (800*24) 19200 paid in capital in excess of par (800*3) 2400 15-Aug Cash (1200*21) 25200 paid in capita in excess of par 2,400 Retained earnings 1200 Treasury stock (1200*24) 28800 30-Sep Cash dividend (25000*3) 75000 1) Statement of retained earnings opening balance jan 1,2011 430,000 Add:Net income for the year 188,000 618,000 less:Cash dividend (69000+75000) 144000 Treasury stock 1200 145200 Closing balance dec ,2011 472,800 2) Stockholders Equity section common stock:60,000 shares authorized shares ,par value of $15 ,25000 shares issued and outstanding 375,000 paid in capital in excess of par value,common stock 90,000 Retained earnings 472,800 total Equity 937,800
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