Coronado Company has the following stockholders’ equity accounts at December 31,

Question

Coronado Company has the following stockholders’ equity accounts at December 31, 2017.

Common Stock ($100 par value, authorized 7,900 shares) $483,500

Retained Earnings 307,400

a. Prepare entries in journal form to record the following transactions, which took place during 2018. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

b.  Prepare the stockholders’ equity section of Coronado Company’s balance sheet after giving effect to these transactions, assuming that the net income for 2018 was $85,900. State law requires restriction of retained earnings for the amount of treasury stock. (Enter account name only and do not provide descriptive information.)

(1)   300 shares of outstanding stock were purchased at $97 per share. (These are to be accounted for using the cost method.) (2) A $20 per share cash dividend was declared. (3) The dividend declared in (2) above was paid. (4) The treasury shares purchased in (1) above were resold at $103 per share. (5) 450 shares of outstanding stock were purchased at $105 per share. (6) 320 of the shares purchased in (5) above were resold at $96 per share.

Explanation / Answer

Answer a. Journal Entry Date Particulars Dr. Amt. Cr. Amt. 1 Treasury Stock                                                             Dr.          29,100 300 Shares X $97 To Cash          29,100 300 Shares X $97 (Record the purchase of Treasury Stock) 2 Retained Earnings                                                     Dr.          90,700 (4835 - 300) X $20 To Cash Dividends Payable          90,700 (4835 - 300) X $20 (Record The Cash Dividends declared) 3 Cash Dividends Payable                                          Dr.          90,700 To Cash          90,700 (Record the cash dividends paid) 4 Cash                                                                                 Dr.          30,900 300 Shares X $103 To Treasury Stock          29,100 300 Shares X $97 To Paid in Capital in Excess of Par - Treasury            1,800 300 Shares X $6 (record the issue of treasury stock) 5 Treasury Stock                                                             Dr.          47,250 450 Shares X $105 To Cash          47,250 450 Shares X $105 (Record the purchase of Treasury Stock) 6 Cash                                                                                 Dr.          30,720 320 Shares X $96 Retained Earnings                                                      Dr.            2,880 320 Shares X ($105 - $96) To Treasury Stock          33,600 320 Shares X $105 (record the issue of treasury stock) Answer b Balance Sheet (Partial) As on Dec 31, 2018 Stockholders' Equity Common Stock, $100 Par, 7,900 Shares Autorized, 4,835 Shares issued & Oustanding       483,500 Paid in Capital in Excess of Par - Treasury            1,800 Total Paid in Capital       485,300 Retained Earnings       299,720       785,020 Less: Treasury Stock - 130 Shares       (13,650) Total Stockholders' Equity       771,370 Statement of Retained Earnings As on Dec 31, 2018 Beginning Balance       307,400 Add: Net Income          85,900 Sub-total       393,300 Less: Cash Dividends       (90,700) Less: Treasury Stock - Loss on Reissue          (2,880) Ending Balance       299,720

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