Nav - Go Enterprises Inc. produces aeronautical navigation equipment. The stockh
ID: 2445735 • Letter: N
Question
Nav - Go Enterprises Inc. produces aeronautical navigation equipment. The stockholders' equity accounts of Nav - Oo Enterprises Inc., with balances on January 1, 2014, are as follows; Common Stock, $5 stated value (900,000 shares authorized, 620,000 shares issued)......................................................................................$3,100,000 Paid - In Capital in Excess of Stated Value - Common Stock........................1,240,000 Retained Earnings ................................................................................................4,875,000 Treasury Stock (48,000 shares, at cost)............................................................288,000 The following selected transactions occurred during the year: Jan, 15, Paid cash dividends of $0.06 per share on the common stock. The dividend had been properly recorded when declared on December 1 of the preceding fiscal year for $34,320. Mar, 15. Sold all of the treasury stock for $6.75 per share. Apr, 13, Issued 200,000 shares of common stock for $8 per share. June 14, Declared a 3% stock dividend on common stock, to be capitalized at the market price of the stock, which is $7.50 per share. July 10. Issued the certificates for the dividend declared on June 14. Oct. 30. Purchased 50,000 shares of treasury stock for $6 per share. Declared a $0.08 - per - share dividend on common stock. Closed the credit balance of the income summary account, $775,000. Closed the two dividends accounts to Retained Earnings. Enter the January 1 balances in T accounts for the stockholders' equity accounts listed. Also prepare T accounts for the following: Paid - In Capital from Sale of Treasury Stock; Stock Dividends Distributable; Stock Dividends; Cash Dividends. Journalize the entries to record the transactions, and post to the eight selected accounts. Prepare a retained earnings statement for the year ended December 31, 2014. Prepare the Stockholders' Equity section of the December 31, 2014, balance sheet.
Explanation / Answer
Answer:-
To begin with you need to know that there are 620,000 shares of common stock issued but, because of the Treasury Stock, only 572,000 shares outstanding. You only need to worry about the shares outstanding when calculating dividends.
Jan 15. paid cash dividends of $0.08 per share on the common stock. The dividend had been properly recorded when declared on December 1 of the preceding fiscal year for $34,320
Dr Dividends Payable $34,320
Cr Cash $34,320
Apr 13. Issued $200,000 shares of comon stock for $1,600,000
200,000 x $5 stated value = $1000,000
Dr Cash 1,600,000
Cr Common Stock 1000,000
Cr Paid-In Capital in Excess of Stated Value 600,000
*Note: There are now 572,000 + 200,000 = 772,000 shares outstanding.
June 14. Sold all of the treasury stock for $324,000
Dr Cash 324,000
Cr Common Treasury Stock 288,000
Cr Paid-In Capital From Sale of Treasury Stock 36,000
*There are now 772,000 + 48,000 = 820,000 shares outstanding
June 14. Declared a 3% stock dividend on common stock, to be capitalized at the market price of the stock, which is $7.50 per share.
772,000 x 3% x $ 7.5= $173,700 stock dividend
772,000 x 3% x $5 stated value = $115,800 stock dividend distributable
Dr Stock Dividends 173,700
Cr Stock Dividends Distributable 115,800
Cr Paid-In Capital in Excess of Stated Value 58,000
July10. Issued the certificates for the dividend declared on June14.
Dr Stock Dividends Distributable 115,800
Cr Common Stock 115,800
*There are now 772,000 x 1.03 = 795,160 shares outstanding
Oct 30. Purchased 50,000 shares of treasury stock for $300,000
Dr Treasury Stock 300,000
Cr Cash 300,000
*There are now 795,160 - 50,000 = 745,160 shares outstanding
Oct 30. Declared a $0.08-per-share dividend on common stock
745,160 x 0.08 = $59,612.80 dividend
Dr Cash Dividends 59,613
Cr Dividends Payable 59,613
31. Closed the credit balance of the income summary account, $950,000
Dr Income Summary 775,000
Cr Retained Earnings 775,000
31. Closed the two dividends accounts to Retained Earnings
Dr Retained Earnings 233,313
Cr Stock Dividends 173,700
Cr Cash Dividends 59,613
3) prepare a retained earnings statement for the year ended December 31, 2012
Retained earnings (beginning balance) . . . . . . . . . . . $, 4,875,000
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 775,000
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56,50,000
Less: Cash dividends . . . . . . . . . . . . . .$. 59,613
. . . . .Stock dividends . . . . . . . . . . . . . . 173,700 . . . . .. 233,313
Retained earnings (ending balance) . . . . . . . . . . . . . $ 5,416,687
) Prepare the stockholders' Equity section of the December 31, 2012, balance sheet.
Paid-in capital
Common stock, $5 stated value
(900,000 shares authorized, 620,000 shares issued) . . . . . . . . . . . $3,100,000
Additional paid-in capital
Paid-in capital in excess of stated value . . . . . . . . . . . $1,840,000
Paid-in capital from sale of treasury stock . . . . . . . . . . . . 36,000
Total paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,876,000
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,416,687
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7,276,687
Less: Treasury stock (50,000 shares at cost) . . . . . . . . . . . . . . . . . . . 300,000
Total stockholders' equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $6,976,687
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