Morrow Enterprises Inc. manufactures bathroom fixtures. The stockholders’ equity

Question

Morrow Enterprises Inc. manufactures bathroom fixtures. The stockholders’ equity accounts of Morrow Enterprises Inc., with balances on January 1, 2016, are as follows:

The following selected transactions occurred during the year:

Closed the two dividends accounts to Retained Earnings.

Common Stock, $20 stated value (500,000 shares authorized, 375,000 shares issued) $ 7,500,000 Paid-In Capital in Excess of Stated Value—Common Stock 825,000 Retained Earnings 33,600,000 Treasury Stock (25,000 shares, at cost) 450,000

Explanation / Answer

Jan 22
Dr Dividends Payable 28,000
Cr Cash 28,000

Apr 10
75,000 x $24= $1,800,000
Dr Cash 1,800,000
Cr Common Stock 1,500,000
Cr Paid-In Capital in Excess of Stated Value 300,000
*Note: There are now 350,000 + 75,000 = 425,000 shares outstanding.

June 6. Sold all of the treasury stock for 26 per share
=25000*26=$650,000
Dr Cash 650,000
Cr Common Treasury Stock 500,000
Cr Paid-In Capital From Sale of Treasury Stock 150,000
*There are now 425,000 + 25,000 = 450,000 shares outstanding

July 5. Declared a 4% stock dividend on common stock, to be capitalized at the market price of the stock, which is $20 per share.
450,000 x 4% x $25 = $450,000 stock dividend
450,000 x 4% x $20 stated value = $360,000 stock dividend distributable
Dr Stock Dividends 450,000
Cr Stock Dividends Distributable 360,000
Cr Paid-In Capital in Excess of Stated Value 90,000

Aug 15. Issued the certificates for the dividend declared on July 5.
Dr Stock Dividends Distributable 360,000
Cr Common Stock 360,000
*There are now 450,000 x 1.04 = 468,000 shares outstanding

Nov 23. Purchased 30,000 shares of treasury stock for 19 per share
Dr Treasury Stock 570,000
Cr Cash 570,000
*There are now 468,000 - 30,000 = 438,000 shares outstanding

Dec 28. Declared a $0.1-per-share dividend on common stock
438,000 x 0.1 = $43,800 dividend
Dr Cash Dividends 43,800
Cr Dividends Payable 43,800

31. Closed the credit balance of the income summary account, $1,125,000
Dr Income Summary 1,125,000
Cr Retained Earnings 1,125,000

31. Closed the two dividends accounts to Retained Earnings
Dr Retained Earnings 403,800
Cr Stock Dividends 360,000
Cr Cash Dividends 43,800

Related Questions

Navigate

• Browse (All)
• Browse M
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.