5. Houghton Company began business on January 1,2015 by issuing all of ts 1.350,

Question

5. Houghton Company began business on January 1,2015 by issuing all of ts 1.350,000 authorized shares of ts 31 par value common stock for $20 per share On June 30, Houghton declared a cash dividend of 32 50 share to stockholders of record on July 31. Houghton paid the cash dividend on August 30 On November 1, Houghton reacquired 270,000 of its own shares of stock for 331 per share On December 22 Houghton resold 135,000 of these shanes for $37 per share all of the necessary journal entries to mecord the events described above [if no entry is required for a transactionlevent, select No Journal Entry Required in the first account field) Journal entry worksheet Record the issue of 1,250.000 authored shares of $1 par value for S26 per share. Note: Ester Equity Balance Sheet as of 120$2015 Toral Shockholders Equity O Type here to search

Explanation / Answer

JOURNAL ENTRY WORKSHEET

Transaction

General Journal

Debit ($)

Credit ($)

1

Bank A/c

35100000

Issue of Shares

To Share Application A/c

35100000

(Being Share application Received $26 for 1350000 shares)

Share Application A/c

35100000

To Share Capital A/c(1*1350000)

1350000

To Securities Premium A/c

33750000

(Being amount transferred to share capital)

2

Retained Earnings A/c

3375000

Dividend declare

To Dividend Payable

3375000

(Being Dividend declared 2.5*1350000)

3

Dividend Payable A/c

3375000

Dividend paid

To Bank A/c

3375000

(Being cash dividend paid)

4

Share Capital A/c (1*270000)

270000

Repurchase of 270000 shares

Securities Premium A/c(30*270000)

8100000

To Share Holders

8370000

(Being 270000 shares repurchased @ 31)

Share Holders A/c

8370000

To Bank A/c

8370000

(Being amount paid to shareholders)

Securities Premium A/c

270000

To Capital Redemption Reserve

270000

(Being amount of nominal value of shares repurchased transferred to Capital redemption Reserve)

5

Share Capital A/c (1*135000)

135000

Repurchase of 135000 shares

Securities Premium A/c(36*135000)

4860000

To Share Holders

4995000

(Being 135000 shares repurchased @ 37)

Share Holders A/c

4995000

To Bank A/c

4995000

(Being amount paid to shareholders)

Securities Premium A/c

135000

To Capital Redemption Reserve

135000

(Being amount of nominal value of shares repurchased transferred to Capital redemption Reserve)

Section of Equity

HOUGHTON COMPANY

Stockholders Equity

Balance Sheet as at 12/31/2015

Sub Total($)

Total ($)

Share Capital

Issued

1350000

less: Repurchased (135000+270000)

405000

945000

Reserves

a) Retained earnings

During the year

6000000

Less: Dividend paid

3375000

2625000

b) Capital Redemption Reserve

405000

c) Securities Premium

20385000

TOTAL

24360000

JOURNAL ENTRY WORKSHEET

Transaction

General Journal

Debit ($)

Credit ($)

1

Bank A/c

35100000

Issue of Shares

To Share Application A/c

35100000

(Being Share application Received $26 for 1350000 shares)

Share Application A/c

35100000

To Share Capital A/c(1*1350000)

1350000

To Securities Premium A/c

33750000

(Being amount transferred to share capital)

2

Retained Earnings A/c

3375000

Dividend declare

To Dividend Payable

3375000

(Being Dividend declared 2.5*1350000)

3

Dividend Payable A/c

3375000

Dividend paid

To Bank A/c

3375000

(Being cash dividend paid)

4

Share Capital A/c (1*270000)

270000

Repurchase of 270000 shares

Securities Premium A/c(30*270000)

8100000

To Share Holders

8370000

(Being 270000 shares repurchased @ 31)

Share Holders A/c

8370000

To Bank A/c

8370000

(Being amount paid to shareholders)

Securities Premium A/c

270000

To Capital Redemption Reserve

270000

(Being amount of nominal value of shares repurchased transferred to Capital redemption Reserve)

5

Share Capital A/c (1*135000)

135000

Repurchase of 135000 shares

Securities Premium A/c(36*135000)

4860000

To Share Holders

4995000

(Being 135000 shares repurchased @ 37)

Share Holders A/c

4995000

To Bank A/c

4995000

(Being amount paid to shareholders)

Securities Premium A/c

135000

To Capital Redemption Reserve

135000

(Being amount of nominal value of shares repurchased transferred to Capital redemption Reserve)

Section of Equity

HOUGHTON COMPANY

Stockholders Equity

Balance Sheet as at 12/31/2015

Sub Total($)

Total ($)

Share Capital

Issued

1350000

less: Repurchased (135000+270000)

405000

945000

Reserves

a) Retained earnings

During the year

6000000

Less: Dividend paid

3375000

2625000

b) Capital Redemption Reserve

405000

c) Securities Premium

20385000

TOTAL

24360000

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