Problem 13-2A Cash dividends, treasury stock, and statement of retained earnings PLEASE HELP ME!!!?
2 years ago
I am having a hard time calculating the answers, please show the working outs thoroughly pleaseContext Corporation reports the following components of stockholders’ equity on December 31, 2011. Common stock—$20 par value, 100,000 shares authorized, 55,000 shares issued and outstanding $1,100,000 Paid-in capital in excess of par value, common stock$70,000 Retained earnings $400,000 Total stockholders' equity$1,570,000In year 2012, the following transactions affected its stockholders’ equity accounts.Jan.1 Purchased 5,000 shares of its own stock at $20 cash per share.Jan.5 Directors declared a $4 per share cash dividend payable on Feb. 28 to the Feb. 5 stockholders of record.Feb.28 Paid the dividend declared on January 5.July 6 Sold 1,875 of its treasury shares at $24 cash per share.Aug.22 Sold 3,125 of its treasury shares at $17 cash per share.Sept.5 Directors declared a $4 per share cash dividend payable on October 28 to the September 25 stockholders of record.Oct.28 Paid the dividend declared on September 5.Dec.31 Closed the $408,000 credit balance (from net income) in the Income Summary account to Retained Earnings.Required:1. Prepare journal entries to record each of these transactions for 2012.2. Prepare a statement of retained earnings for the year ended December 31, 2012.3. Prepare the stockholders' equity section of the company’s balance sheet as of December 31, 2010.

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Jan.1 Purchased 5,000 shares of its own stock at $20 cash per share.
5,000 x 20 = 100,000
Dr Treasury Stock 100,000
Cr Cash 100,000
*There are now 55,000 shares of common stock issued, 50,000 shares outstanding.

Jan.5 Directors declared a $4 per share cash dividend payable on Feb. 28 to the Feb. 5 stockholders of record.
50,000 x 4 = 200,000
Dr Cash Dividends 200,000
Cr Dividends Payable 200,000

Feb.28 Paid the dividend declared on January 5.
Dr Dividends Payable 200,000
Cr Cash 200,000

July 6 Sold 1,875 of its treasury shares at $24 cash per share.
1,875 x 24 = $45,000 total sales price
1,875 x 20 = $37,500 cost
Dr Cash 45,000
Cr Common Treasury Stock 37.500
Cr Paid-in Capital on Sale of Treasury Stock 7,500
*There are now 55,000 shares of common stock issued, 51,875 shares outstanding.

Aug.22 Sold 3,125 of its treasury shares at $17 cash per share.
3,125 x 17 = $53,125 total sales price
3,125 x 20 = $62,500 total cost
Dr Cash 53,125
Cr Paid-in Capital on Sale of Treasury Stock 7,500
Cr Retained Earnings 1,875
Cr Common Treasury Stock 62,500
*Since there was only $7,500 in the excess treasury stock paid-in capital account, the difference is taken out of retained earnings.
There are now 55,000 shares of common stock issued AND outstanding.

Sept.5 Directors declared a $4 per share cash dividend payable on October 28 to the September 25 stockholders of record.
55,000 x 4 = $220,000
Dr Cash Dividends 220,000
Cr Dividends Payable 220,000

Oct.28 Paid the dividend declared on September 5.
Dr Dividends Payable 220,000
Cr Cash 220,000

Dec.31 Closed the $408,000 credit balance (from net income) in the Income Summary account to Retained Earnings.
Dr Income Summary 408,000
Cr Retained Earnings 408,000

2. Prepare a statement of retained earnings for the year ended December 31, 2012.
Retained earnings, January 1, 2012 . . . . . . $400,000
Net Income . . . . . . . . . . . . . . . . . . . . . . . . 408,000. . . $808,000

Less: Dividends . . . . . . . . . . . . . . . . . . . . .420,000
Less: Sale of Treasury Stock Deductions . . . . 1,875
Total Deductions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 421,875

Retained earnings, December 31, 2012 . . . . . . . . . . . . . $386,125

3. Prepare the stockholders' equity section of the company’s balance sheet as of December 31, 2010.

Common stock—$20 par value, 100,000 shares authorized,
55,000 shares issued and outstanding . . . . . . . . . . . . . . . . $1,100,000
Paid-in capital in excess of par value, common stock . . . . . . . . .70,000
Total Paid-in Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,170,000
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 386,125
Total stockholders' equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$1,556,125
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