Journalize transactions, post, and prepare a stockholders\' equity section; calc
ID: 2718879 • Letter: J
Question
Journalize transactions, post, and prepare a stockholders' equity section; calculate ratios.
(LO 2, 3, 5, 7, 8), AP
Instructions
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.
Calculate the payout ratio, earnings per share, and return on common stockholders' equity.
(Hint: Use the common shares outstanding on January 1 and December 31 to determine average shares outstanding.)
P11-2BJournalize transactions, post, and prepare a stockholders' equity section; calculate ratios.
(LO 2, 3, 5, 7, 8), AP
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.Instructions
1.Journalize the transactions. (Include entries to close net income and dividends to Retained Earnings.)
2.Enter the beginning balances in the accounts, and post the journal entries to the stockholders' equity accounts. (Use T-accounts.)
3.Prepare the stockholders' equity section of the balance sheet at December 31, 2014.
Tot. paid-in capital $2,776,000 4.Calculate the payout ratio, earnings per share, and return on common stockholders' equity.
(Hint: Use the common shares outstanding on January 1 and December 31 to determine average shares outstanding.)
Explanation / Answer
Journal Entry:-
Feb-1:-
Debit Bank = 160,000
Credit Common Stock = 20,000
Credit Paid-in Capital in Excess of Stated Value—Common Stock = 120,000
Nov-10
Debit Common Stock = 4000
Debit Paid-in Capital in Excess of Stated Value—Common Stock = 12000
Credit Bank = 16,000
Nov-15
Debit Retained Earnings = 18,000
Credit
Dec-1
Debit Retained Earnings = 304,800
Credit Dividend Payable to Common StockHolders = 304,800
Dec-15
Debit Dividend Payable to Preferred Stockholders = 18000
Credit Bank = 18000
Dec-31
Debit Dividend Payable to Common StockHolders = 304,800
Credit Bank = 304,800
Dec-31
Debit Profit & Loss a/c = 408,000
Credit Retained Earnings = 408,000
Stockholders Equity A/C Debit
Credit
Bank
4,000
Opening Balance
1000,000
Closing Balnce
1016,000
Bank
20,000
..
Stockholders' equity section of the balance sheet at December 31, 2014
Common Stock
1016,000
Paid-in Capital in Excess of Stated Value—Common Stock (1400,000+120,000)
1520,000
Retained Earnings (1716,000+85,200)
1801,200
Treasury Stock (20000+16000)
36,000
..
Journal Entry:-
Feb-1:-
Debit Bank = 160,000
Credit Common Stock = 20,000
Credit Paid-in Capital in Excess of Stated Value—Common Stock = 120,000
Nov-10
Debit Common Stock = 4000
Debit Paid-in Capital in Excess of Stated Value—Common Stock = 12000
Credit Bank = 16,000
Nov-15
Debit Retained Earnings = 18,000
Credit
Dec-1
Debit Retained Earnings = 304,800
Credit Dividend Payable to Common StockHolders = 304,800
Dec-15
Debit Dividend Payable to Preferred Stockholders = 18000
Credit Bank = 18000
Dec-31
Debit Dividend Payable to Common StockHolders = 304,800
Credit Bank = 304,800
Dec-31
Debit Profit & Loss a/c = 408,000
Credit Retained Earnings = 408,000
Stockholders Equity A/C Debit
Credit
Bank
4,000
Opening Balance
1000,000
Closing Balnce
1016,000
Bank
20,000
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