Need Help - Accounting. Stockholders\' Equity: Transactions and Balance Sheet Pr
ID: 2463261 • Letter: N
Question
Need Help - Accounting.
Stockholders' Equity: Transactions and Balance Sheet Presentation The stockholders' equity of Summit Corporation at january 1 follows: 7 Percent preferred stock, $100 par value, 20,000 shares authorized; 5,000 shares issued and outstanding $500,000 Common stock, $15 par value, 100,000 shares authorized; 40,000 shares issued and outstanding Paid-in capital in excess of par value-Preferred stock Paid-in capital in excess of par value-Common stock Retained earnings 600,000 24,000 360,000 325,000 $1,809,000 Total Stockholders' Equity The following transactions, among others, occurred during the year: Jan. 12 Announced a 3-for-1 common stock split, reducing the par value of the common stock to $5 per share. The authorization was increased to 300,000 shares. Converted $40,000 face value of convertible bonds payable (the book value of the bonds was $43,000) to common stock. Each $1,000 bond converted to 125 shares of common Mar. 31 stock June Sept. Oct. Nov. Dec. Acquired equipment with a fair market value of $60,000 in exchange for 500 shares of preferred stock. 1 Acquired 10,000 shares of common stock for cash at $10 per share. 1 2 Sold 1500 treasury shares at $12 per share. 21 Issued 5,000 shares of common stock at $11 per share. 28 Sold 1,200 treasury shares at $9 per share. 31 Closed net income of $83,000 to the Retained Earnings account. Required a. Set up T-accounts for the stockholders' equity accounts as of the beginning of the year and enter the January 1 balances. b. Prepare journal entries for the given transactions and post them to the T-accounts (set up any additional T-accounts needed). Do not prepare the journal entry for the Dec. 31 transaction, but post the appropriate amount to the Retained Earnings T-account. Determine the ending balances for the stockholders' equity accounts. c. Prepare the stockholders' equity section of the balance sheet at December 31Explanation / Answer
Conversion of bonds to common share Book value of bonds $ 43,000 Number of bond converted 43000/1000 43 Shares issued per unit of bond 125 Number of common share issued 125 x 43 5,375 Par value of share $ 5 Total share issued 5 x 5375 $ 26,875 Paid up capital = 43000 - 26875 $ 16,125 Stock Split Number of share outstanding 40000 Issued 3 stock per 1 stock 120000 Par value 5 Total common stock $ 600,000 Date Debit Credit 31-Mar Bonds payable $ 40,000 Amortized bond premium $ 3,000 Common stock $ 26,875 Paid in capital in access of par - Common $ 16,125 Converted $40000 face value of convertible bonds payable (book value 43000) to common stock. 1-Jun Equipment $ 60,000 Preferred stock $ 50,000 Paid in capital in access of par - Preferred stock $ 10,000 Issue preferred stock in exchange of preferred stock 1-Sep Treasury stock - common $ 100,000 Cash $ 100,000 Purchased Treasury stock 12-Oct Cash $ 18,000 Treasury stock - common $ 15,000 Paid in capital - Treasury stock $ 3,000 Sold Treasury stock 21-Nov Cash $ 55,000 Common stock $ 25,000 Paid in capital in access of par - Common $ 30,000 Issued common stock 28-Dec Cash $ 10,800 Paid in capital from treasury stock $ 1,200 Treasury stock common $ 12,000 Sold Treasury stock cash 1-Sep $ 100,000 12-Oct $ 18,000 Nov-31 $ 55,000 28-Dec $ 10,800 Bonds payable 31-Mar $ 40,000 Premium on bonds payable 31-Mar $ 3,000 Equipment 1-Jun $ 60,000 Preferred stock begining $ 500,000 1-Jun $ 50,000 Common stock Begining $ 600,000 12-Jan $ 600,000 31-Mar $ 26,875 21-Nov $ 25,000 Paid in Capital in excess of Par value - Preferred stock begining $ 24,000 1-Jun $ 10,000 paid in capital in excess of par value - Common stock begining $ 360,000 31-Mar $ 16,125 21-Nov $ 30,000 Paid in capital in excess of par value -Treasury Stock 12-Oct $ 3,000 28-Dec $ 1,200 Treasury Stock Common 1-Sep $ 100,000 12-Oct $ 15,000 28-Dec $ 12,000 Retained earnings Bal $ 325,000 31-Dec $ 1,200 Stock holder's equity Paid in capital Common stock Par value 5 per share, 300,000 shares authorized: 130375 shares outstanding $ 651,875 Preferred stock: 7% Prefered stock 100 par value , 20000 shares authorized, 5500 shares outstanding $ 550,000 $1,201,875 Paid in capital in access of Par - Preferred stock $ 34,000 Paid in capital in access of Par - Common stock $ 406,125 Paid in capital in access of Par - Treasury stock $ 3,000 $ 443,125 Total paid in capital $1,645,000 Retained earnings $ 323,800 $1,968,800 Less : Treasury stock $ 73,000 Total Share holder's equity $1,895,800
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