The balance sheet of Lennox Health Foods, at December 31, 2011, reported 120,000

ID: 2355349 • Letter: T

Question

The balance sheet of Lennox Health Foods, at December 31, 2011, reported 120,000 shares of no-par common stock authorized, with 25,000 shares issued and a Common stock balance of $190,000. Retained earnings had a balance of $115,000. During 2012, the company completed the following selected transactions: Mar 15 Purchased 9,000 shares of treasury stock at $8 per share. Apr 30 Distributed a 10% stock dividend on the outstanding shares of common stock. The market value of common stock was $9 per share. Dec 31 Earned net income of $110,000 during the year. Closed net income to Retained earnings. Requirements 1. Record the transactions in the general journal. Explanations are not required. 2. Prepare the stockholders

Explanation / Answer

1. Record the transactions in the general journal. Explanations are not required.

March 15

Debit: Treasury stock 72,000

Credit: Cash 72,000

(9,000*8 = 72,000)

April 30

Debit: Retained earnings 14,400

Credit: Common stock 14,400

(9*.1*16,000 = 14,400 --- there are 16,000 shares after buying 9,000 treasury stock)

December 31

Debit: Income summary 110,000

Credit: Retained earnings 110,000

2. Prepare the stockholders’ equity section of Lennox Health Foods’ balance sheet at December 31, 2012.

Stockholder’s equity

Common stock, no par, 120,000 authorized, 25,000 issued

204400

Retained earnings

210600

Less cost of treasury stock

-72,000

Total stockholders equity

343000