2.39A Journalizing dividend and treasury stock transactions, preparing a Learnin

Question

2.39A Journalizing dividend and treasury stock transactions, preparing a Learning Objectives 3, 4, 5 statement of retained earnings, and preparing stockholder' equiry The balance sheet of Morrisey Management Consulting, Inc. at December 31, 2015 reported the following stockholder' equity 2. Retained Earnings Dec. 31, 2016 152,240 Stockholders' Equity Paid-in Capital Common Stock-$10 Par Value: 300,000 shares authorized, 25,000 shares issued and outstanding Paid-in Capital in Excess of Par-Common Total Paid-in Capital $250,000 320,000 570,000 158,000 728,000 Retained Earnings Total Stockholders' Equity During 2016, Morrisey completed the following selected transactions: Feb. 6 Declared a 15% stock dividend on common stock. The market value of Morrisey's stock was $23 per share 15 Distributed the stock dividend Jul 29 Purchased 2,100 shares of treasury stock at $23 per share Nov. 27 Decl ared a $0.20 per share cash dividend on the common stock outstanding Requirements 1. Record the transactions in the general journal. 2. Prepare a retained carnings statement for the year ended December 31, 2016 Morrisey's net income for the year was $86,000. Assume A 3. Preparethe stockholders equity section of the balance

Explanation / Answer

Journal Entries Date Account Title and explanation Debit Credit Feb, 06 Retained Earnings (3750 Shares X 23 Per shares) $ 86,250.00    To Common Stock Dividend distributable $ 37,500.00      To Paid in Capital in Excess of par $ 48,750.00 (To record the declaration of stock dividend) Note: 25000 shars X 15% = 3750 Shares Feb, 15 Common Stock Dividend distributable $ 37,500.00     To Common Stock $ 37,500.00 (to Record the payment of stock deividend) July , 29 Treasury stock (2100 shares X 23 Per shares) $ 48,300.00      To Cash $ 48,300.00 (To Record the purchase of treasury Stock) Nov, 27 Dividend $   5,330.00      To Dividend Payable $   5,330.00 (To Record the dividend declared) CALCULATION OF DIVIDEND AMOUNT Opening Outstanding Shares = 25000 Shares Add: Stock dividend declared 3750 Shares Less: Purchase of Stock as treasurry stock 2100 Shares Outstanding of number of shares = 26650 Shares Dividend per shares = $            0.20 Per shares Dividend Amount = $         5,330 Answer =2 RETAINED EARNINGS STATEMENTS Opening Retained Earnings = $   1,58,000 Add: Profit of the year = $       86,000 Less: Stock Dividends declared and paid= $       86,250 Less : Purchase of Treasurry Stock $       48,300 Less: Dividend declared $   5,330.00 Net Closing Balance $   1,04,120 Answer = 3) Stockholder's Equity Section Shareholders Equity Amount Authorized Capital (300,000 shares of $ 10) $ 30,00,000 Issued and Outstanding capital Share Captial (25000 + 3750 -2100) $   2,66,500 Paid in Capital Excess of Par (320,000+ 48,750) $   3,68,750 Retained Earning $   1,04,120 Less: Treasurry Stock $     -48,300 Total Stockholder's Equity $ 36,91,070

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