22. 200 points value: Houghton Company began business on January 1, 2015 by issu

Question

22. 200 points value: Houghton Company began business on January 1, 2015 by issuing all of its 1,850,000 authorized shares of its $1 par value common stock for $36 per share. On June 30, Houghton declared a cash dividend of $2.75 per share to stockholders of record on July 31. Houghton paid the cash dividend on August 30. On November 1, Houghton reacquired 370,000 of its own shares of stock for $41 per share. On December 22 Houghton resold 185,000 of these shares for $47 per share Required a. Prepare all of the necessary journal entries to record the events described above. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.) View transaction list Journal entry worksheet 2 4 Record the issue of 1,850,000 authorized shares of $1 par value for $36 per share Note: Enter debits before credits. Transaction General Journal Debit Credit Record entry Clear entry View general journal

Explanation / Answer

Houghton Company

Houghton Company

Journal Entries

Date

Account Titles and Explanation

Ref. No.

Debit

Credit

1-Jan-15

Cash

$66,600,000

Common Stock

$1,850,000

Paid-in-Capital, Common Stock

$64,750,000

(To record the issue of 1,850,000 shares at $36 per share,1 par value and $35 paid-in capital, in excess of par)

30-Jun-15

Retained Earnings

$5,087,500

Dividends Payable

$5,087,500

(To record declaration of cash dividend of $2.75 per share on 1,850,000 shares; 1,850,000 x $2.75 = $5,087,500)

30-Aug-15

Dividends Payable

$5,087,500

Cash

$5,087,500

(To record payment of cash dividend)

1-Nov-15

Treasury Stock

$15,170,000

Cash

$15,170,000

To record reacquisition of 370,000 shares at $41 per share)

22-Dec-15

Cash

$8,695,000

Treasury Stock

$7,585,000

Paid-in-Capital - Treasury Stock

$1,110,000

(To record resale of185,000 shares of treasury stock at $41 per share, and the excess above cost of shares as paid-in capital)

Houghton Company

Stockholders' Equity Section of the Balance Sheet

as of December 31, 2015

Common Stock, 1,850,000 shares issued at $1 par value

$1,850,000

Paid-in Capital in excess of par value, Common

$64,750,000

Paid-in-Capital, in excess of par - Treasury Stock

$1,110,000

Retained Earnings

$5,912,500

Less: Treasury stock, at cost

($7,585,000)

Stockholders' Equity

$66,037,500

Note –

Retained earnings amount is computed as follows,

Net income for 2015 $11,000,000

Less: Cash dividend$5,087,500

Retained Earnings as of December 31, 2015 = $5,912,500

Houghton Company

Journal Entries

Date

Account Titles and Explanation

Ref. No.

Debit

Credit

1-Jan-15

Cash

$66,600,000

Common Stock

$1,850,000

Paid-in-Capital, Common Stock

$64,750,000

(To record the issue of 1,850,000 shares at $36 per share,1 par value and $35 paid-in capital, in excess of par)

30-Jun-15

Retained Earnings

$5,087,500

Dividends Payable

$5,087,500

(To record declaration of cash dividend of $2.75 per share on 1,850,000 shares; 1,850,000 x $2.75 = $5,087,500)

30-Aug-15

Dividends Payable

$5,087,500

Cash

$5,087,500

(To record payment of cash dividend)

1-Nov-15

Treasury Stock

$15,170,000

Cash

$15,170,000

To record reacquisition of 370,000 shares at $41 per share)

22-Dec-15

Cash

$8,695,000

Treasury Stock

$7,585,000

Paid-in-Capital - Treasury Stock

$1,110,000

(To record resale of185,000 shares of treasury stock at $41 per share, and the excess above cost of shares as paid-in capital)

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