Rocklin Corporation reports the following components of stockholders’ equity on December 31, 2009.
Common stock—$15 par value, 100,000 shares authorized, 55,000 shares issued and outstanding
$825,000
Paid-in capital in excess of par value, common stock 70,000
Retained earnings
430,000
Total stockholders’ equity
$1,325,000
In year 2010, the following transactions affected its stockholders’ equity accounts.
Jan. 1 Purchased 4,000 shares of its own stock at $25 cash per share.
Jan. 5 Directors declared a $4 per share cash dividend payable on Feb. 28 to the Feb. 5 stockholders of record.
Feb. 28 Paid the dividend declared on January 5.
July 6 Sold 1,500 of its treasury shares at $29 cash per share.
Aug. 22 Sold 2,500 of its treasury shares at $22 cash per share.
Sept. 5 Directors declared a $4 per share cash dividend payable on October 28 to the September 25 stockholders of record.
Oct. 28 Paid the dividend declared on September 5.
Dec. 31 Closed the $428,000 credit balance (from net income) in the Income Summary account to Retained Earnings.
4 Answers
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Jan. 1 Purchased 4,000 shares of its own stock at $25 cash per share.
Dr Treasury Stock 100,000
Cr Cash 100,000
Jan. 5 Directors declared a $4 per share cash dividend payable on Feb. 28 to the Feb. 5 stockholders of record.
55,000 - 4,000 = 51,000 shares outstanding.
Dr Cash Dividends 204,000 (51,000 x 4)
Cr Dividends Payable 204,000
Feb. 28 Paid the dividend declared on January 5.
Dr Dividends Payable 204,000
Cr Cash 204,000
July 6 Sold 1,500 of its treasury shares at $29 cash per share.
Dr Cash 43,500
Cr Common Treasury Stock 37,500 (1,500 x 25)
Cr Paid-In Capital from Sale of Treasury Stock 6,000
Aug. 22 Sold 2,500 of its treasury shares at $22 cash per share.
Dr Cash 55,000
Dr Paid-In Capital from Sale of Treasury Stock 6,000
Dr Retained Earnings 1,500*
Cr Common Treasury Stock 62,500 (2,500 x 25)
*Note: You cannot debit the Paid-In Capital from Sale of Treasury Stock account for more than it has been credited. Any difference will be made to the Retained Earnings account.
Sept. 5 Directors declared a $4 per share cash dividend payable on October 28 to the September 25 stockholders of record.
There are now 56,000 shares outstanding
Dr Cash Dividends 224,000
Cr Dividends Payable 224,000
Oct. 28 Paid the dividend declared on September 5.
Dr Dividends Payable 224,000
Cr Cash 224,000
Dec. 31 Closed the $428,000 credit balance (from net income) in the Income Summary account to Retained Earnings.
Dr Income Summary 428,000
Cr Retained Earnings 428,000
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A wrong Cash 25,000.00 Camus - Capital 25,000.00 B wrong Rent Expense 1,100.00 Cash 1,100.00 C correct Supplies Expense 1,170.00 Accounts Payable 1,170.00 D correct Professional Equipment 5,800.00 Accounts Payable 5,800.00 E correct Office Equipment 864.00 Accounts Payable 864.00 F wrong Cash 4,820.00 Professional Fees Earned 4,820.00 G wrong Creditor 1,850.00 Bank 1,850.00 H correct Utilities Expense 382.00 Cash 382.00 I correct Salary Expense 1,150.00 Cash 1,150.00 J wrong Cash 3,800.00 Professional Fees Earned 3,800.00 K correct T.Camus Drawing 1,600.00 Cash 1,600.00 When journalising, please take assistance of the balance sheet equation. First - determine the element that fits the transaction and event Second - determine the increase and decrease in the element Third - record the entry
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Really interesting question, looking forward to going through the replies
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