The stockholders\' equity accounts of Sigma Corporation on January 1, 2010, were
ID: 2383474 • Letter: T
Question
The stockholders' equity accounts of Sigma Corporation on January 1, 2010, were as follows.
Preferred Stock (8%, $100 par noncumulative, 5,000 shares authorized)$ 300,000
Common Stock ($5 stated value, 300,000 shares authorized)1,000,000
Paid-in Capital in Excess of Par Value—Preferred Stock15,000
Paid-in Capital in Excess of Stated Value—Common Stock480,000
Retained Earnings688,000
Treasury Stock—Common (5,000 shares)40,000
During 2010 the corporation had the following transactions and events pertaining to its stockholders' equity.
Feb.1Issued 5,000 shares of common stock for $30,000.
Mar.20Purchased 1,000 additional shares of common treasury stock at $7 per share.
Oct.1Declared an 8% cash dividend on preferred stock, payable November 1.
Nov.1Paid the dividend declared on October 1.
Dec.1Declared a $0.50 per share cash dividend to common stockholders of record on December 15, payable December 31, 2010.
31Determined that net income for the year was $280,000. Paid the dividend declared on December 1.
Hint: Journalize transactions, post, and prepare a stockholders' equity section; calculate ratios.
Instructions
(a) Journalize the transactions. (Include entries to close net income and dividends to Retained Earnings.)
(b) Enter the beginning balances in the accounts and post the journal entries to the stockholders' equity accounts. (Use T accounts.)
(c) Prepare the stockholders' equity section of the balance sheet at December 31, 2010.
Tot. paid-in capital $1,825,000
(d) Calculate the payout ratio, earnings per share, and return on common stockholders' equity ratio. (Note: Use the common shares outstanding on January 1 and December 31 to determine the average shares outstanding.)
Explanation / Answer
feb
Cash 30,000
Common stock
25,000
Stock
5,000
march
Treasury Stock
7,000
cash
7,000
oct
Dividends
24,000
Dividends payable
24,000
nov
Dividends payable
24,000
cash
24,000
dec
cash Dividends
99,500
Dividends payable
99,500
dec
income
280,000
Earnings
280,000
Retained Earnings
123,500
cash Dividends
123,500
Dividends payable
99,500
cash
99,500
feb
Cash 30,000
Common stock
25,000
Stock
5,000
march
Treasury Stock
7,000
cash
7,000
oct
Dividends
24,000
Dividends payable
24,000
nov
Dividends payable
24,000
cash
24,000
dec
cash Dividends
99,500
Dividends payable
99,500
dec
income
280,000
Earnings
280,000
Retained Earnings
123,500
cash Dividends
123,500
Dividends payable
99,500
cash
99,500
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