Alexander Corporation reports the following components of stockholders’ equity o
ID: 2596199 • Letter: A
Question
Alexander Corporation reports the following components of stockholders’ equity on December 31, 2016:
In year 2017, the following transactions affected its stockholders’ equity accounts.
Required:
1. Prepare journal entries to record each of these transactions for 2017.
2. Prepare a statement of retained earnings for the year ended December 31, 2017.
3. Prepare the stockholders’ equity section of the company’s balance sheet as of December 31, 2017.
49,000 shares issued and outstanding $ 1,225,000 Paid-in capital in excess of par value, common stock 98,000 Retained earnings 406,000 Total stockholders’ equity $ 1,729,000
Explanation / Answer
Solution:
Part 1 – Journal Entries
Date
General Journal
Debit
Credit
Jan.2
Treasury Stock (4900 Shares x $25)
$122,500
Cash
$122,500
Jan.7
Retained Earnings
$66,150
Cash Dividend Payable (44100 Shares x $1.5)
$66,150
(Number of Outstanding shares = (Issued Shares 49000 Shares - Treasury 4900) = 44,100 Shares
Feb.9
No Entry is required on Record Date
Feb.28
Cash Dividend Payable
$66,150
Cash
$66,150
July.9
Cash (1960 Shares x 30)
$58,800
Treasury Stock (1960 Shares x Cost $25)
$49,000
Pain in Capital from Treasury Stock (Bal. figure)
$9,800
Aug.27
Cash (2450 Shares x $20)
$49,000
Paid in Capital from Treasury Stock
$9,800
Retained Earnings (Bal. figure)
$2,450
Treasury Stock (2450 Shares x $25 at cost)
$61,250
Sept.9
Retained Earnings
$97,020
Cash Dividend Payable (48,510 Shares x $2)
$97,020
(Number of Outstanding shares = 44,100 Shares + 1960+2450 = 48,510 Shares)
Sept.23
NO Entry on record date
Oct.22
Cash Dividend Payable
$97,020
Cash
$97,020
Dec.31
Income Summary
$71,000
Retained Earnings
$71,000
Part 2 – Statement of retained earnings for the year ended December 31, 2017
Statement of Retained Earnings
For the Year Ended December 31, 2017
Beginning Balance
$406,000
Add: Profit Earned in 2017
$71,000
Less: Dividend paid (66150+97,020)
-$163,170
Less: Treasury Stock adjustment (Refer journal entry dated Aug.27)
-$2,450
Ending Balance
$311,380
Part 3 -- The stockholders’ equity section of the company’s balance sheet as of December 31, 2017.
Stockholders’ Equity
December 31, 2017
Common Stock
$1,225,000
Paid-in capital in excess of par value, common stock
$98,000
Retained Earnings (refer part 2)
$311,380
Total Paid in Capital and Retained Earnings
$1,536,380
Less:
Treasury Stock (4900 - 1960 - 2450) at $25
$12,250
Total Stockholders' Equity
$1,524,130
Hope the above calculations, working and explanations are clear to you and help you in understanding the concept of question.... please rate my answer...in case any doubt, post a comment and I will try to resolve the doubt ASAP…thank you
Date
General Journal
Debit
Credit
Jan.2
Treasury Stock (4900 Shares x $25)
$122,500
Cash
$122,500
Jan.7
Retained Earnings
$66,150
Cash Dividend Payable (44100 Shares x $1.5)
$66,150
(Number of Outstanding shares = (Issued Shares 49000 Shares - Treasury 4900) = 44,100 Shares
Feb.9
No Entry is required on Record Date
Feb.28
Cash Dividend Payable
$66,150
Cash
$66,150
July.9
Cash (1960 Shares x 30)
$58,800
Treasury Stock (1960 Shares x Cost $25)
$49,000
Pain in Capital from Treasury Stock (Bal. figure)
$9,800
Aug.27
Cash (2450 Shares x $20)
$49,000
Paid in Capital from Treasury Stock
$9,800
Retained Earnings (Bal. figure)
$2,450
Treasury Stock (2450 Shares x $25 at cost)
$61,250
Sept.9
Retained Earnings
$97,020
Cash Dividend Payable (48,510 Shares x $2)
$97,020
(Number of Outstanding shares = 44,100 Shares + 1960+2450 = 48,510 Shares)
Sept.23
NO Entry on record date
Oct.22
Cash Dividend Payable
$97,020
Cash
$97,020
Dec.31
Income Summary
$71,000
Retained Earnings
$71,000
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