This is one question... Stockholders\' Equity: Transactions and Balance Sheet Pr

Question

This is one question... Stockholders' Equity: Transactions and Balance Sheet Presentation The stockholders' equity of Summit Corporation at January 1 follows 7 Percent preferred stock, $100 par value, 20,000 shares authorized; 5,000 shares issued and outstanding Common stock, $15 par value, 100,000 shares authorized; $500,000 40,000 shares issued and outstanding Paid-in capital in excess of par value-Preferred stock Paid-in capital in excess of par value-Common stock Retained earnings 600,000 24,000 360,000 325,000 $1,809,000 Total Stockholders Equity The following transactions, among others, occurred during te year Announced a 4-for-1 common stock split, reducing the par value of the common stock to $3.75 per share. The authorization was increased to 400,000 shares. Jan. 12 Converted $40,000 face value of convertible bonds payable (the book value of the bonds was $43.000) to common stock. Each Mar. $1,000 bond converted to 125 shares of common stock June 1 Acquired equipment with a fair market value of $70.000 in exchange for 500 shares of preferred stock Sept. 1 Acquired 10,000 shares of common stock for cash at $10 per share. Oct 12 Sold 1,500 treasury shares at $12 per share. Nov. 21 Issued 5,000 shares of common stock at $11 cash per share.

Explanation / Answer

SUMMIT CORPORATION General journal for the year ended December 31 Date Account Title Debit Credit Jan.12 Memorandum - Common stock split Mar.31 Bonds Payable 40000 Premium on bond payable 3000 Common stock 18750 Paid-in-capital in excess of par - Common Stock 24250 (Conversion of bonds payable to 5,000 shares common stock) June.1 Equipment 70000 Preferred Stock 50000 Paid-in-capital in excess of par - Preferred Stock 20000 (Issue of 500 shares of prefered for equipment) Sept.1 Treasury Stock 100000 Cash 100000 (10,000 shares of common shares acquired @$10 per share) Oct.12 Cash 18000 Treasury Stock 15000 Paid-in-capital in excess of par - Treasury Stock 3000 (Reissue of 1,500 treasury shares @$12 per share) Nov.21 Cash 55000 Paid-in-capital in excess of par - Common Stock 36250 Common stock 18750 (Isuue of 5,000 shares of common stock @$11 per share) Dec.28 Cash 10800 Paid-in-capital in excess of par - Treasury Stock 1200 Treasury Stock 12000 (Reissue of 1,200 treasury shares @$9 per share) Dec.31 Income summary 95000 Retained Earnings 95000 (Closing of net income to retained earnings) Face value of the bonds 40000 Number of $1,000 value bonds 40 Number of shares per bond 125 Total number of shares 5000 Par. Value of the shares (5,000 x $3.75) 18750 APIC - common stock 24250 Number of common shares outstanding on Jan.1 (after stock split) 160000 Add: Converted on Marc.31 5000            Issued on Nov.21 5000 Number of common shares on Dec.31 170000 Number of preferred shares outstanding on Jan.1 5000 Add: Issued for purchase of equipment 500 Number of common shares on Dec.31 5500 Cash Common Stock Date Debit credit Date Debit credit Sept.1 100000 Beg.Bal. 600000 Oct.12 18000 Mar.31 18750 Dec.28 10800 Nov.21 18750 Bal. 637500 Preferred Stock Paid-in-capital in excess of par - Common Stock Date Debit credit Date Debit credit Beg.Bal. 500000 Beg.Bal. 360000 June.1 50000 Mar.31 24250 Nov.21 36250 Bal. 550000 Bal. 420500 Retained Earnings Paid-in-capital in excess of par - Prefered Stock Date Debit credit Date Debit credit Beg.Bal. 325000 Beg.Bal. 24000 Dec.31 95000 June.1 20000 Bal. 420000 Bal. 44000 Bonds Payable Paid-in-capital in excess of par - Treasury Stock Date Debit credit Date Debit credit Mar.31 40000 Oct.12 3000 Dec.28 1200 1200 3000 Bal. 1800 Premium on bond payable Equipment Date Debit credit Date Debit credit Mar.31 3000 June.1 70000 Treasury Stock Date Debit credit Sept. 100000 Oct.12 15000 Dec.28 12000 100000 27000 Bal. 73000 SUMMIT CORPORATION Stockholders' equity as at December 31 Paid - in - capital 7% prefered stock,$100 par value, 20,000 shares authorised 5,500 shares issued and outstanding 550000 Common Stock, $3.75 par value, 400,000 shares authorised 637500 170,000 shares issued and outstanding Paid-in-capital in excess of par - Preferred Stock 44000 Paid-in-capital in excess of par - Common Stock 420500 Paid-in-capital in excess of par - Treasury Stock 1800 Total paid-in-capital 1653800 Retained earnings Balance as at January 1 325000 Add: Net income for the year 95000 Balance as at December 31 420000 Treasury stock (7,300 shares of common stock) -73000 Total stockholders equity 2000800

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