Entries for Selected Corporate Transactions Morrow Enterprises Inc. manufactures

Question

Entries for Selected Corporate Transactions Morrow Enterprises Inc. manufactures bathroom fixtures. Morrow Enterprises’ stockholders’ equity accounts, with balances on January 1, 20Y6, are as follows: Common Stock, $10 stated value (650,000 shares authorized, 440,000 shares issued) $4,400,000 Paid-In Capital in Excess of Stated Value-Common Stock 850,000 Retained Earnings 9,990,000 Treasury Stock (44,000 shares, at cost) 616,000 The following selected transactions occurred during the year: Jan. 22. Paid cash dividends of $0.15 per share on the common stock. The dividend had been properly recorded when declared on December 1 of the preceding fiscal year for $59,400. Apr. 10. Issued 85,000 shares of common stock for $1,530,000. June 6. Sold all of the treasury stock for $17 per share. July 5. Declared a 5% Stock dividend on common stock, to be capitalized at the market price of the stock, which is $20 per share. Aug. 15. Issued shares of stock for the stock dividend declared on July 5. Nov. 23. Purchased 28,000 shares of treasury stock for $19 per share. Dec. 28. Declared a $0.18-per-share dividend on common stock. 31. Closed the credit balance of the income summary account, $10,390,000. 31. Closed the two dividends accounts to Retained Earnings. Required: 1. The January 1 balances have been entered in T accounts for the stockholders' equity accounts. Record the above transactions in the T accounts and provide the December 31 balance where appropriate. If required, round to one decimal place.

Explanation / Answer

Calculations:

Stock dividends = 5% x (440000 + 85000) = 5% x 525000 = 26250 shares

Cash dividends = $0.18 x (440000 + 85000 - 28000) = $0.18 x 497000 = $89460

Common Stock Paid-in Capital in Excess-Common Stock Beg. Bal. 4400000 Beg. Bal. 850000 Apr. 10 850000 Apr. 10 680000 Jul. 5 262500 End. Bal. 5250000 End. Bal. 1792500 Retained Earnings Treasury Stock Dec. 31 525000 Beg. Bal. 9990000 Beg. Bal. 616000 Jun. 6 616000 Dec. 31 89460 Dec. 31 10390000 Nov. 23 532000 End. Bal. 19765540 End. Bal. 532000 Dividends Payable Paid-in Capital in Excess-Treasury Stock Jan. 22 59400 Beg. Bal. 59400 Jun. 6 132000 Dec. 28 89460 End. Bal. 89460 End. Bal. 132000 Stock Dividends Stock Dividends Payable Jul. 5 525000 Dec. 31 525000 Aug. 15 262500 Jul. 5 262500 Dividends Dec. 28 89460 Dec. 31 89460

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