Houghton Company began business on January 1, 2015 by issuing all of its 1,600,0
ID: 2431157 • Letter: H
Question
Houghton Company began business on January 1, 2015 by issuing all of its 1,600,000 authorized shares of its $2 par value common stock for $31 per share. On June 30, Houghton declared a cash dividend of $1.50 per share to stockholders of record on July 31. Houghton paid the cash dividend on August 30. On November 1, Houghton reacquired 320,000 of its own shares of stock for $36 per share. On December 22, Houghton resold 160,000 of these shares for $42 per share.
Required:
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.)
Prepare the stockholders' equity section of the balance sheet as of December 31, 2015 assuming that the net income for the year was $8,500,000.
Houghton Company began business on January 1, 2015 by issuing all of its 1,600,000 authorized shares of its $2 par value common stock for $31 per share. On June 30, Houghton declared a cash dividend of $1.50 per share to stockholders of record on July 31. Houghton paid the cash dividend on August 30. On November 1, Houghton reacquired 320,000 of its own shares of stock for $36 per share. On December 22, Houghton resold 160,000 of these shares for $42 per share.
Explanation / Answer
a)
Date
Particulars
Debit
Credit
January 1, 2015
Cash
49600000
(1600000*31 = 49600000)
Common Stock
3200000
(1600000*2 = 3200000)
Paid in Capital in excess of common stock
46400000
(1600000*29 = 46400000)
June 30, 2015
Retained Earnings
2400000
(1600000*1.50 = 2400000)
Dividend Payable
2400000
(1600000*1.50 = 2400000)
August 30, 2015
Dividend Payable
2400000
Cash
2400000
November 1,2015
Treasury Stock
11520000
(320000*36 = 2400000)
Cash
11520000
December 22,2015
Cash
6720000
(160000*42 = 6720000)
Treasury Stock
5760000
(160000*36 = 5760000)
Paid in Capital in excess of Treasury stock
960000
(160000*6 = 960000)
b)
Particulars
Amount ($)
Common Stock
3200000
Paid in Capital in excess of common stock
46400000
Add: Net Income
8500000
Less: Dividend paid
2400000
Sub Total
55700000
Less: Treasury Stock
11520000
Add: Treasury Stock reissued
6720000
Stockholders’ equity
50900000
Date
Particulars
Debit
Credit
January 1, 2015
Cash
49600000
(1600000*31 = 49600000)
Common Stock
3200000
(1600000*2 = 3200000)
Paid in Capital in excess of common stock
46400000
(1600000*29 = 46400000)
June 30, 2015
Retained Earnings
2400000
(1600000*1.50 = 2400000)
Dividend Payable
2400000
(1600000*1.50 = 2400000)
August 30, 2015
Dividend Payable
2400000
Cash
2400000
November 1,2015
Treasury Stock
11520000
(320000*36 = 2400000)
Cash
11520000
December 22,2015
Cash
6720000
(160000*42 = 6720000)
Treasury Stock
5760000
(160000*36 = 5760000)
Paid in Capital in excess of Treasury stock
960000
(160000*6 = 960000)
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