Exercise 13-18 Cash dividends, treasury stock, and statement of retained earning

Question

Exercise 13-18 Cash dividends, treasury stock, and statement of retained earnings L.O. C3, P2, P3

Kroll Corporation reports the following components of stockholders%u2019 equity on December 31, 2011.

In year 2012, the following transactions affected its stockholders%u2019 equity accounts.

Purchased 3,100 shares of its own stock at $30 cash per share.

Directors declared a $2 per share cash dividend payable on Feb. 28 to the Feb. 9 stockholders of record.

Directors declared a $2 per share cash dividend payable on October 22 to the September 23 stockholders of record.

Closed the $7,000 credit balance (from net income) in the Income Summary account to Retained Earnings.

Prepare journal entries to record each of these transactions for 2012. (Omit the "$" sign in your response.)

Prepare a statement of retained earnings for the year ended December 31, 2012. (Amounts to be deducted should be indicated with a minus sign. Omit the "$" sign in your response.)

Prepare the stockholders%u2019 equity section of the company%u2019s balance sheet as of December 31, 2012. (Omit the "$" sign in your response.)

Kroll Corporation reports the following components of stockholders%u2019 equity on December 31, 2011.

Explanation / Answer

Hi,

Please find the answers as follows:

Part B:

Retained Earnings, December 31 2011 = 272000

+ Net Income = 7000

Less Cash Dividends Declared (85800 + 92000) = -177800

Less Treasury Stock Reissuances = -2700

Retained Earnings, December 31 2012 = 272000 + 7000 - 177800 - 2700 = 98500

Part C:

KROLL CORPORATION Stockholder's 2019 Equity Section of the Balance Sheet

Common Stock = 1380000

Paid in Capital in Excess of Par Value = 51000

Retained Earnings = 98500

Total Stockholder's Equity = 1380000 + 51000 + 98500 = 1529500

Thanks.

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