Context Corporation reports the following components of shareholders’ equity on

Question

Context Corporation reports the following components of shareholders’ equity on December 31, 2013: Common stock - $10 par value; 50,000 shares authorized 20,000 shares issued and outstanding....................... $200,000 Paid-in capital in excess of par value, common stock....... $30,000 Retained earnings...........................................$135,000

In the year 2014, the following transactions affected its shareholders’ equity accounts:

January 1: Purchased 2,000 shares of its own stock at $20.00 cash per share.

January 5: Directors declared a $2.00 per share dividend payable on February 28 to the February 5 shareholders of record.

February 28: Paid dividend declared on January 5.

July 6: Sold 750 off its treasury shares at $17.00 cash per share. This sale is part of the January 1 purchase at $20.00 per share).

September 5: Directors declared a $2.00 per share cash dividend payable on October 28 to the September 25 shareholders of record.

October 28: Paid the dividend declared on September 5.

December 31: Closed the $194,000 credit balance from net income of December 31, 20X4, in the income summary account to retained earnings.

Prepare all general journal entries to record the selected transactions.

Prepare a stockholders’ equity section as of the close of business on December 31, 2014.

Explanation / Answer

DATE GENERAL JOURNAL DEBIT CREDIT 2014 Jan-01 Treasury Stock, Common 40000                                 Cash 40000 Jan-05 Retained Earnings 36000                                 Common Dividend Payable 36000 Feb-28 Common Dividend Payable 36000                                 Cash 36000 Jul-06 Cash 12750                                Treasury Stock, Common 7500                                Paid-in Capital, treasury Stock 5250 Sep-05 Retained Earnings 37500                                 Common Dividend Payable 37500 Oct-28 Common Dividend Payable 37500                                 Cash 37500 Income summary 194000                                Retained Earnings 194000 CONTEXT CORPORATION STOCKHOLDER'S EQUITY SECTION OF BALANCE SHEET DECEMBER 31, 2014 $ Common Stock - $ 10 par value 187500 Paid-in Capital in excess of par value, common stock 35250 Retained Earnings 255500 Total Stockholder's Equity 478250

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