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22nd Edition
ISBN: 9780077632878
Author: Wild
Publisher: MCG
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Chapter 13, Problem 2APSA

Requirement-1:

To determine

To prepare:

The journal entries to record the transactions for 2016

Requirement-1:

Expert Solution
Check Mark

Answer to Problem 2APSA

Solution:

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

    Journal entries
    Date Account titleDebit 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 titleDebit 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

2)

Expert Solution
Check Mark

Answer to Problem 2APSA

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

Requirement-3:

Expert Solution
Check Mark

Answer to Problem 2APSA

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

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