You’ve been hired to perform an audit of Hubbard Company for the year ended December 31, 2019. You find the following account balances related to shareholders’ equity: Preferred stock, $100 par $ 33,000 Common stock, $10 par 68,000 Capital surplus (15,100) Retained earnings 172,000 Because of the antiquated terminology and negative balance, you examine the Capital Surplus account and find the following entries: Credit (Debit) Additional paid-in capital on common stock $ 27,700 Capital from donated land 16,900 Treasury stock (400 common shares at cost) (5,600) Additional paid-in capital on preferred stock 2,000 Stock dividend (50%) (20,000) Prior period adjustment (net of income taxes) (10,100) Loss from fire (uninsured), 2018 (18,100) Property dividend declared (5,600) Cash dividends declared (23,300) Balance $ (36,100) Your examination of the Preferred Stock and Common Stock accounts reveals that the amounts shown correctly state the total par value of the issued capital stock. The Retained Earnings account contains the accumulated earnings of the company, with the exception of any items of retained earnings that were inappropriately debited or credited to the Capital Surplus account. Required: 1. Prepare whatever journal entries are necessary to eliminate the Capital Surplus account and to correct Hubbard’s shareholders’ equity accounts.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Question

You’ve been hired to perform an audit of Hubbard Company for the year ended December 31, 2019. You find the following account balances related to shareholders’ equity:

Preferred stock, $100 par	$ 33,000
Common stock, $10 par	68,000
Capital surplus	(15,100)
Retained earnings	172,000

Because of the antiquated terminology and negative balance, you examine the Capital Surplus account and find the following entries:

	Credit (Debit)
Additional paid-in capital on common stock	$ 27,700
Capital from donated land	16,900
Treasury stock (400 common shares at cost)	(5,600)
Additional paid-in capital on preferred stock	2,000
Stock dividend (50%)	(20,000)
Prior period adjustment (net of income taxes)	(10,100)
Loss from fire (uninsured), 2018	(18,100)
Property dividend declared	(5,600)
Cash dividends declared	(23,300)
Balance	$ (36,100)

Your examination of the Preferred Stock and Common Stock accounts reveals that the amounts shown correctly state the total par value of the issued capital stock. The Retained Earnings account contains the accumulated earnings of the company, with the exception of any items of retained earnings that were inappropriately debited or credited to the Capital Surplus account.

Required:

1.	Prepare whatever journal entries are necessary to eliminate the Capital Surplus account and to correct Hubbard’s shareholders’ equity accounts.

(I'm not sure if what I have so far is right?)

1. Prepare a journal entry to eliminate the Capital Surplus account and to correct Hubbard's shareholders' equity accounts on December 31.
General Journal Instructions
All transactions on this page must be entered (except for post ref(s)) before you will receive Check My Work feedback.
PAGE 1
GENERAL JOURNAL
Score: 58/113
DATE
ACCOUNT TITLE
POST. REF.
DEBIT
CREDIT
Dec. 31
Treasury Stock
5,600.00
1
2
Retained Earnings
77,100.00
Additional Paid-in Capital on Preferred Stock
2,000.00
3
4
Additional Paid-in Capital on Common Stock
27,700.00
5
Unrealized Capital from Donation of Land
16,900.00
Capital Surplus
36,100.00
6
7
8
9
Points:
11.29 / 22

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 2 steps with 1 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Auditing Accounting Estimates & Using the Work of Specialists

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions