Common stock $1 Par Add. Paid in Cap Retained Earnings Treasury Stock Total Shar
ID: 2516643 • Letter: C
Question
Common stock
$1 Par
Add. Paid in Cap
Retained
Earnings
Treasury
Stock
Total Share-
Holders Equity
Bal. 1/1/2015
354,000
10,415,000
2,761,044
-
13,530,044
Common Shares
370,000
12,210,000
Shares Repurchase
(83,500 shares)
(1,670,000)
Cash Dividends
(50,000)
Net Income
2,696,789
Bal. 12/31/2015
724,000
22,625,000
5,407,833
(1,670,000)
27,086,833
Cash Dividend Comm Stock
(75,000)
Stock div 5 for 4
181,000
(181,000)
Net Income
3,805,617
Bal. 12/31/216
905,000
22,625,000
8,957,450
(1,670,000)
31,817,450
Requirement 1: Use Journal Entries to establish beginning balances for each of the shareholders' equity accounts as of 1/1/15. Assume the only asset on Hawkins balance sheet was cash.
Requirement 2: Prepare journal entries for the events and transactions that affected Stockholders' equity during 2015 and 2016.
Common stock
$1 Par
Add. Paid in Cap
Retained
Earnings
Treasury
Stock
Total Share-
Holders Equity
Bal. 1/1/2015
354,000
10,415,000
2,761,044
-
13,530,044
Common Shares
370,000
12,210,000
Shares Repurchase
(83,500 shares)
(1,670,000)
Cash Dividends
(50,000)
Net Income
2,696,789
Bal. 12/31/2015
724,000
22,625,000
5,407,833
(1,670,000)
27,086,833
Cash Dividend Comm Stock
(75,000)
Stock div 5 for 4
181,000
(181,000)
Net Income
3,805,617
Bal. 12/31/216
905,000
22,625,000
8,957,450
(1,670,000)
31,817,450
Explanation / Answer
`1/1/15 Cash account Dr 13,530,044 To Common Stock 354,000 To Paid in capital, excess of par - Common 10,415,000 To Retained Earnings 2,761,044 (To record beginning balances as of 1/1/15) 2015 Cash account Dr 12,580,000 To Common Stock 370,000 To Paid in capital, excess of par - Common 12,210,000 (To record Issue of 370,000 Common shares $1 Par value, Issue price $34) Par value if shares is $1, Common stock increased by 370,000, hence number of shares issued = 370,000/1 = 370,000 Issue price is derived as follows - Total cash received / number of shares = 12,580,000 / 370,000 Treasury Stock 1,670,000 To Cash account 1,670,000 (To record purchase of 83,500 shares @$20 each) Purchase price of Treasury stock = 1,670,000 / 83500 = $20 per share Retained Earnings Dr 50,000 To Dividends Payable 50,000 (To record dividends declared ) Dividends Payable Dr 50,000 To Cash 50,000 (To record payment of dividends) Profit and Loss account dr 2,696,789 To Retained earnings 2,696,789 (Closing entry to record net income for the year) 2016 Retained Earnings Dr 75,000 To Dividends Payable 75,000 (To record dividends declared ) Dividends Payable Dr 75,000 To Cash 75,000 (To record payment of dividends) Profit and Loss account dr 3,805,617 To Retained earnings 3,805,617 (Closing entry to record net income for the year) Retained Earnings dr 181,000 To Common Stock - dividend distributable 181,000 (To record Stock dividend declared - 5 for 4) Common Stock - dividend distributable 181,000 To Common Stock 181,000 (To record stock dividend issued)
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