Alexander Corporation reports the following components of stockholders\' equity

Question

Alexander Corporation reports the following components of stockholders' equity on December 31, 2016: Common stock-$25 par value, 70,000 shares authorized, 41,000 shares issued and outstanding Paid-in capital in excess of par value, common stock Retained earnings Total stockholders' equity $1,025,000 82,000 378,000 $1,485,000 In year 2017, the following transactions affected its stockholders' equity accounts Jan. Jan. 2 Purchased 4,100 shares of its own stock at $25 cash per share. 7 Directors declared a $1.50 per share cash dividend payable on February 28 to the February 9 stockholders of record Feb. 28 Paid the dividend declared on January 7. July 9 Sold 1,640 of its treasury shares at $30 cash per share. Aug. 27 Sold 2,050 of its treasury shares at $20 cash per share. Sept. 9 Directors declared a $2 per share cash dividend payable on October 22 to the September 23 stockholders of record Oct. 22 Paid the dividend declared on September 9. Dec. 31 Closed the $63,000 credit balance (from net income) in the Income Summary account to Retained Earnings. Required 1. Prepare journal entries to record each of these transactions for 2017 2. Prepare a statement of retained earnings for the year ended December 31, 2017. 3. Prepare the stockholders' equity section of the company's balance sheet as of December 31, 2017

Explanation / Answer

Solution:

Part 1 – Journal Entries

Transaction

Date

Account Titles and Explanation

Debit

Credit

1)

Jan.02

Treasury Stock (4100*25)

$102,500

Cash

$102,500

2)

Jan.07

Retained Earnings

$55,350

Cash Dividend Payable

   (36,900 Shares x $1.50)

$55,350

(Number of Issued and Outstanding Shares = 41,000 Shares - Treasury Stock 4100 = 36,900)

3)

Feb.28

Cash Dividend Payable

$55,350

Cash

$55,350

4)

July.09

Cash (1640 Shares x $30)

$49,200

Treasury Stock (1640 Shars *Cost $25)

$41,000

Additional Paid in Capital from Treasury Stock (bal fig)

$8,200

5)

Aug.27

Cash (2050 Shares x $20)

$41,000

Additional Paid in Capital from Treasury Stock

$8,200

Retained Earnings (bal fig)

$2,050

Treasury Stock (2050 Shars *Cost $25)

$51,250

6)

Sept.9

Retained Earnings

$81,180

Cash Dividend Payable (40,590 Shares x $2)

$81,180

(Number of Issued and Outstanding Shares = 36,900 + 1640+2050 = 40,590 Shares

7)

Oct.22

Cash Dividend Payable

$81,180

Cash

$81,180

8)

Dec.31

Income Summary Statement

$63,000

Retained Earnings

$63,000

Part 2 – Statement of Retained Earnings

Statement of Retained Earnings

Retained Earnings Dec 31, 2016

$378,000

Plus: Income of Year 2017

$63,000

$441,000

Less: Dividend Paid (81,180+55350)

($136,530)

Less: Treasury Stock adjustment

($2,050)

Retained Earnings Dec 31, 2017

$302,420

Part 3 --- Stockholders equity section

Shareholders Equity Section

$$

Common Stock - $25 par value, 70,000 shares authorized, 41,000 shares issued and 40,590 Shares Outstanding

$1,025,000

Paid in capital in excess of par value, common stock

$82,000

Retained Earnings (refer part 2)

$302,420

$1,409,420

Less: Treasury Stock (410 Shares at Cost $25)

$10,250

Stockholders Equity

$1,399,170

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Transaction

Date

Account Titles and Explanation

Debit

Credit

1)

Jan.02

Treasury Stock (4100*25)

$102,500

Cash

$102,500

2)

Jan.07

Retained Earnings

$55,350

Cash Dividend Payable

   (36,900 Shares x $1.50)

$55,350

(Number of Issued and Outstanding Shares = 41,000 Shares - Treasury Stock 4100 = 36,900)

3)

Feb.28

Cash Dividend Payable

$55,350

Cash

$55,350

4)

July.09

Cash (1640 Shares x $30)

$49,200

Treasury Stock (1640 Shars *Cost $25)

$41,000

Additional Paid in Capital from Treasury Stock (bal fig)

$8,200

5)

Aug.27

Cash (2050 Shares x $20)

$41,000

Additional Paid in Capital from Treasury Stock

$8,200

Retained Earnings (bal fig)

$2,050

Treasury Stock (2050 Shars *Cost $25)

$51,250

6)

Sept.9

Retained Earnings

$81,180

Cash Dividend Payable (40,590 Shares x $2)

$81,180

(Number of Issued and Outstanding Shares = 36,900 + 1640+2050 = 40,590 Shares

7)

Oct.22

Cash Dividend Payable

$81,180

Cash

$81,180

8)

Dec.31

Income Summary Statement

$63,000

Retained Earnings

$63,000

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