
Requirement-1:
To prepare:
The
Requirement-1:

Answer to Problem 2BPSB
Solution:
The journal entries to record the transactions for 2016 are as follows:
Journal entries | |||
Date | Account title | Debit | Credit |
Jan. 10 | $ 480,000 | ||
Cash | $ 480,000 | ||
Mar. 2 | $ 240,000 | ||
Common Dividend Payable | $ 240,000 | ||
Mar. 31 | Common Dividend Payable | $ 240,000 | |
Cash | $ 240,000 | ||
Nov. 11 | Cash | $ 312,000 | |
Treasury Stock | $ 288,000 | ||
Paid in excess par- Treasury stock | $ 24,000 | ||
Nov. 25 | Cash | $ 152,000 | |
Paid in excess par- Treasury stock | $ 24,000 | ||
Retained earnings | $ 16,000 | ||
Treasury Stock | $ 192,000 | ||
Dec. 1 | Retained earnings | $ 500,000 | |
Common Dividend Payable | $ 500,000 | ||
Dec. 31 | Income Summary | $ 1,072,000 | |
Retained earnings | $ 1,072,000 |
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. 10 | Treasury Stock | $ 480,000 | |
Cash | $ 480,000 | ||
(Being 40000 treasury shares purchased @ $12 each for total $480,000) | |||
Mar. 2 | Retained earnings | $ 240,000 | |
Common Dividend Payable | $ 240,000 | ||
(Being Cash dividend declared on (200000-40000) 160000 outstanding shares @ $1.5 each for total $240000) | |||
Mar. 31 | Common Dividend Payable | $ 240,000 | |
Cash | $ 240,000 | ||
(Being Cash dividend declared paid in cash) | |||
Nov. 11 | Cash | $ 312,000 | |
Treasury Stock | $ 288,000 | ||
Paid in excess par- Treasury stock (312000-288000) | $ 24,000 | ||
(Being 24000 treasury shares sold for $13 each cash = (24000*13) = $312,000. The cost of these treasury stock is (24000*12) = $288,000 | |||
Nov. 25 | Cash | $ 152,000 | |
Paid in excess par- Treasury stock | $ 24,000 | ||
Retained earnings (192000-152000-24000) | $ 16,000 | ||
Treasury Stock | $ 192,000 | ||
(Being 16000 treasury shares sold for $9.50 each cash = (16000*$9.50) = $152,000. The cost of these treasury stock is (16000*12) = $192,000 | |||
Dec. 1 | Retained earnings | $ 500,000 | |
Common Dividend Payable | $ 500,000 | ||
(Being Cash dividend declared on (160000+24000+16000)= 200,000 outstanding shares @ $2.50 each for total $500,000) | |||
Dec. 31 | Income Summary | $ 1,072,000 | |
Retained earnings | $ 1,072,000 | ||
(Being net income for the year 1,072,000 closed) |
Conclusion:
Hence, the journal entries to record the transactions for 2016 are prepared.
2)
To prepare:
The Statement of Retained earnings for the year ended December 31, 2016
2)

Answer to Problem 2BPSB
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 | $ 2,160,000 |
Net Income for the year 2016 | $ 1,072,000 |
Cash Dividends Declared | $ (740,000) |
Treasury stock adjustment | $ (16,000) |
Retained Earnings balance as on Dec. 31, 2016 | $ 2,476,000 |
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 | $ 2,160,000 |
Add: Net Income for the year 2016 | $ 1,072,000 |
Less: Cash Dividends Declared (240000+500000) | $ (740,000) |
Less: Treasury stock adjustment | $ (16,000) |
Retained Earnings balance as on Dec. 31, 2016 | $ 2,476,000 |
Conclusion:
Hence Retained Earnings balance as on Dec. 31, 2016 is $2,476,000
Requirement-3:
To prepare:
The
Requirement-3:

Answer to Problem 2BPSB
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-$1 par value, 320,000 shares authorized, 200,000 shares issued and outstanding | $ 200,000 |
Paid in capital in excess of par value, common stock | $ 1,400,000 |
Retained earnings | $ 2,476,000 |
Total Stock holder's Equity | $ 4,076,000 |
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-$1 par value, 320,000 shares authorized, 200,000 shares issued and outstanding | $ 200,000 |
Paid in capital in excess of par value, common stock | $ 1,400,000 |
Retained earnings | $ 2,476,000 |
Total Stock holder's Equity | $ 4,076,000 |
Conclusion:
Hence Total Stock holder's Equity as on Dec. 31, 2016 is $4,076,000
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Chapter 13 Solutions
Loose Leaf for Fundamentals of Accounting Principles and Connect Access Card
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