Question

Chapter 14 –Corporation: Dividends On-line Homework The stockholders’ equity accounts of Karp Company at January 1, 2017, are as follows: Preferred Stock, 6%, $100 par $600,000 Common Stock, $5 par 500,000 Paid-in Capital in Excess of Par—Preferred Stock 190,000 Paid-in Capital in Excess of Par—Common Stock 297,500 Retained Earnings 800,000 Treasury Stock (10,000 shares) 100,000 There were no dividends in arrears on preferred stock. During 2017, the company had the following transactions and events. July 1 Declared a $1 cash dividend per share on common stock. Sept. 1 Paid the cash dividend declared on July 1. Oct 1 Dec. 1 Reissued the treasury stock for $100,000 Declared and issued a 10% stock dividend on common stock when the market price of the stock was $15 per share. 15 Declared a 6% cash dividend on preferred stock payable January 15, 2018. 31 Determined that net income for the year was $350,000.Closed income summary. Closed the dividends accounts. (a)Journalize the transactions, events, and closing entries for net income and dividends. (b)Enter the beginning balances in the accounts, and post to the stockholders’ equity accounts. (Note: Open additional stockholders’ equity accounts as needed.) (c)Prepare a retained earnings statement for the year. It was discovered that 2016 net income was understated by $50,000.

Answer 1

Date	Account Titles and Explanation	Debit	Credit
1-Jul	Retained Earning	$100,000.00
	Dividend Payable( 100000X$1)		$100,000.00
	TO Record Dividend Declared
1-Sep	Dividend Payable	$100,000.00
	Cash		$100,000.00
	TO Record Dividend Paid
1-Dec	Cash	$100,000.00
	Treasury Stock		$100,000.00
	TO Record Reissue of Treasury Stock
1-Dec	Retained Earning ( 100000X 10%X15)	$150,000.00
	Common Stock Dividend Distributatble (100000X10%*5)		$50,000.00
	Paid in Capital in Excess of Par- Common Stock		$100,000.00
	To Record Stock dividend
15-Dec	Retained Earning	$36,000.00
	Dividend Payable (600000X 6%)		$36,000.00
	To Record Dividend payable for Preferred stock
31-Dec	Income Summary	$350,000.00
	Retained Earning		$350,000.00
	To record close of Income Summary

Karp Company
Stockholder Equity Account
As on 31 / 12 /2017
Stock Holder' Equity
Preferred Stock	$600,000
Common Stock ( 100000+10000)X5	$550,000
Paid in Capital in Excess of Par Value - Common Stock (297500+100000)	$397500
Paid in Capital in Excess of Par Value -Preferred Stock	$190,000
Retained Earning	$864,000
Less : Treasury Stock
Stockholder Equity as on 31/12/2017		$2,601,500

Statement of Retained Earning
Beg Balance	$800,000.00
Add: Net Income	$350,000.00
Less: Dividend (100000+150000+36000)	$286,000.00
Ending Balance	$864,000.00