Chapter 13, Problem 1GLP

Requirement-1:

To determine

To prepare:

The journal entries to record the transactions for 2016

Answer to Problem 1GLP

Solution:

The journal entries to record the transactions for 2016 are as follows:

Journal entries
Date	Account title	Debit	Credit
Jan. 1	Treasury Stock	$ 80,000
	Cash		$ 80,000
Jan. 5	Retained earnings	$ 72,000
	Common Dividend Payable		$ 72,000
Feb. 28	Common Dividend Payable	$ 72,000
	Cash		$ 72,000
Jul. 6	Cash	$ 36,000
	Treasury Stock		$ 30,000
	Paid in excess par- Treasury stock		$ 6,000
Aug. 22	Cash	$ 42,500
	Paid in excess par- Treasury stock	$ 6,000
	Retained earnings (50000-42500-6000)	$ 1,500
	Treasury Stock		$ 50,000
Sept. 5	Retained earnings	$ 80,000
	Common Dividend Payable		$ 80,000
Oct. 28	Common Dividend Payable	$ 80,000
	Cash		$ 80,000
Dec. 31	Income Summary	$ 388,000
	Retained earnings		$ 388,000

Explanation of Solution

Explanation:

The journal entries to record the transactions for 2016 are explained as follows:

Journal entries
Date	Account title	Debit	Credit
Jan. 1	Treasury Stock	$ 80,000
	Cash		$ 80,000
	(Being 4000 treasury shares purchased @ $20 each for total $80,000)
Jan. 5	Retained earnings	$ 72,000
	Common Dividend Payable		$ 72,000
	(Being Cash dividend declared on (40000-4000) 36000 outstanding shares @ $2 each for total $72,000)
Feb. 28	Common Dividend Payable	$ 72,000
	Cash		$ 72,000
	(Being Cash dividend declared paid in cash)
Jul. 6	Cash	$ 36,000
	Treasury Stock		$ 30,000
	Paid in excess par- Treasury stock (36000-30000)		$ 6,000
	(Being 1500 treasury shares sold for $24 each cash = (1500*24) = $36,000. The cost of these treasury stock is (1500*20) = $30,000
Aug. 22	Cash	$ 42,500
	Paid in excess par- Treasury stock	$ 6,000
	Retained earnings (50000-42500-6000)	$ 1,500
	Treasury Stock		$ 50,000
	(Being 2500 treasury shares sold for $17 each cash = (2500*17) = $42,500. The cost of these treasury stock is (2500*20) = $50,000
Sept. 5	Retained earnings	$ 80,000
	Common Dividend Payable		$ 80,000
	(Being Cash dividend declared on (36000+1500+2500)= 40,000 outstanding shares @ $2 each for total $80,000)
Oct. 28	Common Dividend Payable	$ 80,000
	Cash		$ 80,000
	(Being Cash dividend declared paid in cash)
Dec. 31	Income Summary	$ 388,000
	Retained earnings		$ 388,000
	(Being net income for the year 388,000 closed)

Conclusion

Conclusion:

Hence, the journal entries to record the transactions for 2016 are prepared.

2)

To determine

To prepare:

The Statement of Retained earnings for the year ended December 31, 2016

Answer to Problem 1GLP

Solution:

The Statement of Retained earnings for the year ended December 31, 2016 is as follows:

Statement of Retained earnings
For the year ended December 31, 2016
Retained Earnings balance as on Dec. 31, 2015	$ 270,000
Net Income for the year 2016	$ 388,000
Cash Dividends Declared	$ (152,000)
Treasury stock adjustment	$ (1,500)
Retained Earnings balance as on Dec. 31, 2016	$ 504,500

Explanation of Solution

Explanation:

The Statement of Retained earnings for the year ended December 31, 2016 is explained as follows:

Statement of Retained earnings
For the year ended December 31, 2016
Retained Earnings balance as on Dec. 31, 2015	$ 270,000
Add: Net Income for the year 2016	$ 388,000
Less: Cash Dividends Declared (72000+80000)	$ (152,000)
Less: Treasury stock adjustment	$ (1,500)
Retained Earnings balance as on Dec. 31, 2016	$ 504,500

Conclusion

Conclusion:

Hence Retained Earnings balance as on Dec. 31, 2016 is $504,500

Requirement-3:

To determine

To prepare:

The Stockholder's Equity Section of the Balance sheet as on December 31, 2016

Answer to Problem 1GLP

Solution:

The Stockholder's Equity Section of the Balance sheet as on December 31, 2016 is as follows:

Stockholder's Equity Section of the Balance sheet
As on December 31, 2016
Common Stock-$10 par value, 100,000 shares authorized, 40,000 shares issued and outstanding	$ 400,000
Paid in capital in excess of par value, common stock	$ 60,000
Retained earnings	$ 504,500
Total Stock holder's Equity	$ 964,500

Explanation of Solution

Explanation:

The Stockholder's Equity Section of the Balance sheet as on December 31, 2016 is explained as follows:

Stockholder's Equity Section of the Balance sheet
As on December 31, 2016
Common Stock-$10 par value, 100,000 shares authorized, 40,000 shares issued and outstanding	$ 400,000
Paid in capital in excess of par value, common stock	$ 60,000
Retained earnings	$ 504,500
Total Stock holder's Equity	$ 964,500

Conclusion

Conclusion:

Hence Total Stock holder's Equity as on Dec. 31, 2016 is $964,500