Problem 1 - Cash dividends, treasury stock, and statement of retained earnings - Widget Corporation operates in Tampa, Florida and reports the following stockholders’ equity at December 31, 2019. Common stock—$25 par value, 70,000 shares authorized, 42,000 shares issued and outstanding $ 1,050,000 Paid-in capital in excess of par value, common stock 84,000 Retained earnings 382,000 Total stockholders’ equity $ 1,516,000 During 2020, the following transactions affected its stockholders’ equity accounts. 1/2 Purchased 4,200 shares of its own stock at $25 cash per share. 1/7 Directors declared a $1.50 per share cash dividend payable on February 28 to the February 9 stockholders of record. 2/28 Paid the dividend declared on January 7. 7/9 Sold 1,680 of its treasury shares at $30 cash per share. 8/27 Sold 2,100 of its treasury shares at $20 cash per share. 9/9 Directors declared a $2 per share cash dividend payable on October 22 to the September 23 stockholders of record. 10/22 Paid the dividend declared on September 9. 12/31 Closed the $64,000 credit balance (from net income) in the Income Summary account to Retained Earnings. Required: 1. Prepare journal entries to record each of these transactions. 2. Prepare a statement of retained earnings for the year ended December 31, 2020. 3. Prepare the stockholders’ equity section of the company’s balance sheet as of December 31, 2020.

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Problem 1 - Cash dividends, treasury stock, and statement of retained earnings -

Widget Corporation operates in Tampa, Florida and reports the following stockholders’ equity at December 31, 2019.


Common stock—$25 par value, 70,000 shares authorized, 42,000 shares issued and outstanding	$	1,050,000
Paid-in capital in excess of par value, common stock		84,000
Retained earnings		382,000
Total stockholders’ equity	$	1,516,000

During 2020, the following transactions affected its stockholders’ equity accounts.

1/2				Purchased 4,200 shares of its own stock at $25 cash per share.
1/7				Directors declared a $1.50 per share cash dividend payable on February 28 to the February 9 stockholders of record.
2/28				Paid the dividend declared on January 7.
7/9				Sold 1,680 of its treasury shares at $30 cash per share.
8/27				Sold 2,100 of its treasury shares at $20 cash per share.
9/9				Directors declared a $2 per share cash dividend payable on October 22 to the September 23 stockholders of record.
10/22				Paid the dividend declared on September 9.
12/31				Closed the $64,000 credit balance (from net income) in the Income Summary account to Retained Earnings.