Question

The stockholders’ equity accounts of Monty Corp. on January 1, 2020, were as follows.

Preferred Stock (8%, $52 par, cumulative, 10,000 shares authorized)		$  416,000
Common Stock ($1 stated value, 2,100,000 shares authorized)		1,450,000
Paid-in Capital in Excess of Par—Preferred Stock		110,000
Paid-in Capital in Excess of Stated Value—Common Stock		1,400,000
Retained Earnings		1,850,000
Treasury Stock (11,000 common shares)		55,000

During 2020, the corporation had the following transactions and events pertaining to its stockholders’ equity.

Feb.	1		Issued 26,000 shares of common stock for $116,000.
Apr.	14		Sold 5,500 shares of treasury stock—common for $33,900.
Sept.	3		Issued 4,800 shares of common stock for a patent valued at $34,100.
Nov.	10		Purchased 1,000 shares of common stock for the treasury at a cost of $5,700.
Dec.	31		Determined that net income for the year was $465,000.

No dividends were declared during the year.

1) Journalize the transactions and the closing entry for net income. (Record journal entries in the order presented in the problem. 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.) 2) Enter the beginning balances in the accounts, and post the journal entries to the stockholders’ equity accounts. (Use T-accounts.) (Post entries in the order of journal entries presented in the previous part.) 3) Prepare a stockholders’ equity section at December 31, 2020, including the disclosure of the preferred dividends in arrears. (Enter the account name only and do not provide the descriptive information provided in the question.) THANK YOU!! Can you please show me how you got the answers so I can study. I have been working on this problem for hours!

Answer 1

Solution:

Req. 1

Credit Date Feb. 1 Debit $ 116,000 Accounts Cash Common Stock (26,000*$1) Paid-in Capital in Excess of Stated Value-Common Stock $ $ 26,000 90,000 Apr. 14 $ 33,900 Cash Treasury stock Paid-in capital- Treasury stock (5,500*$5) ($33,900-27,500) $ $ 27,500 6,400 Sept. 3 34,100 Patent Common stock (4,800*$1) Paid-in Capital in Excess of Stated Value-Common Stock $ $ 4,800 29,300 Nov. 10 $ 5,700 Treasury stcok Cash $ 5,700 Dec. 31 $ 465,000 Income Summary Retained Earnings (To record closing entry for net income) $ 465,000

Req. 2

Beg. Bal Common stock 1,450,000 26,000 Feb. 1 4,800 Sept. 3 1,480,800 Paid-in Capital in excess of par -Common stock Beg. Bal 1,400,000 90,000 Feb.1 29,300 Sept. 3 End. Bal 1,519,300 End. Bal Preferred Stock 416,000 Paid-in capital in excess of par-preferred stock Beg. Bal 110,000 Beg. Bal End. Bal 416,000 End. Bal 110,000 Treasury Stock 55,000 5,700 27,500 Apr. 14 Beg. Bal. Nov. 10 Beg. Bal Retained Earnings 1,850,000 465,000 Dec. 31 End. Bal 33,200 End. Bal 2,315,000 Paid-in Capital-Treasury stock Beg. Bal. 6400 Apr. 14 End. Bal 6,400

Req. 3.

MONTY CORP. Stockholders' Equity Section of the Balance Sheet December 31, 2020 Common stock 1,480,800 Preferred stock 416,000 Paid-in capital in excess of par value-Common stock 1,519,300 Paid-in capital in excess of par value-Preferred stock 110,000 Paid -in capital-treasury stock 6,400 Retained Earnings 2,315,000 5,847,500 Treasury stock (33,200) Total stockholders' equity $ 5,814,300 (Note: Arrears of $33,280 (i.e.$416,000*8%) of one year Dividends on preferred stockholders)