Alexander Corporation reports the following components of stockholders\' equity

Question

Alexander Corporation reports the following components of stockholders' equity on December 31. 2013: Purchased 3,500 shares of its own shock at dollar 25 cash per share. Directors declared a dollar 1.50 per share cash dividend payable on Feb. 28 to the Feb. 9 stockholders of record. Paid the dividend declared on January 7. Sold 1, 400 of its treasury shares at dollar 30 cash per share. Sold 1, 750 of its treasury shares at dollar 20 cash per share. Directors declared a dollar 2 per share cash dividend payable on October 22 to the September 23 stockholders of record. Paid the dividend declared on September 9. Closed the $57,000 credit balance (from net income) in the Income Summary account to Retained Earnings. Required: Prepare journal entries to record each of these transactions for 2014.

Explanation / Answer

2nd Jan-Cash A/c Dr $87,500

                  To Equity share Application A/c $87,500

(Being Equity Share 3,500 issued @ $25 and amount received)

2nd Jan -Equity Share Application A/c Dr

                   To Equity Share Capital A/c

(Being share application Amount credited)

7th Jan - Retained Earning A/c Dr $5,250

                     To Dividend Payable         $5,250

             (Being dividend declared @1.5 per share for 3,500 share)

28th Feb - Dividend Payale A/c Dr     $5,250

                  To Cash A/c                        $5,250

(Being dividend paid @2 per share for 3500 share)

9th July- Equity Share Capital A/c Dr ($1,400*25) $35,000

               Premium paid on sales of share($1,400*5)$7,000

                 To Cash                                                           $42,000

                (Being share sold at premium)   

27th Aug  Equity Share Capital A/c Dr ($1,750*25) $43,750

                    To Discount on sales of share($1,750*5)$8,750

                    To Cash $ 35,000

                  (Being share sold at discount)

9th Sep - Retained Earning A/c Dr $ 700(350 share @ $2)

                           To Dividend Payable $ 700

(Being dividend declared @2 per share for 350 share)

27th Oct - Dividend Payale A/c Dr $ 700

                      To Cash A/c $ 700

(Being dividend paid @2 per share for 350 share)

31st Dec Profit and Loss A/c Dr $57,000

                  To Retained earning A/c $57,000

(Being credit balance in Profit and loss Account transfer to retained earning Account)

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