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 $500,000 Common stock, $15 par value, 100,000 shares authorized; 40,000 shares issued and outstanding 600,000 Paid-in capital in excess of par value-Preferred stock 24,000 Paid-in capital in excess of par value-Common stock 360,000 Retained earnings 325,000 Total Stockholders' Equity $1,809,000 The following transactions, among others, occurred during the year: Jan. 12 Announced a 3-for-1 common stock split, reducing the par value of the common stock to $5 per share. The authorization was increased to 300,000 shares. Mar. 31 Converted $40,000 face value of convertible bonds payable (the book value of the bonds was $43,000) to common stock. Each $1,000 bond converted to 130 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 $13 per share. Oct. 12 Sold 1,500 treasury shares at $15 per share. Nov. 21 Issued 5,000 shares of common stock at $14 per share. Dec. 28 Sold 1,200 treasury shares at $11 per share. 31 Closed net income of $91,000 to the Retained Earnings account. Required Prepare journal entries for the given transactions and post them to the T-accounts. Do not prepare the journal entry for the Dec. 31 transaction, but post the appropriate amount to the Retained Earnings T-account. Determine the ending balances for the stockholders’ equity accounts. Prepare the stockholders’ equity section of the balance sheet at December 31.
Journal entries: | ||||
Date | Acc Title | Debit $ | Credit $ | |
12-Jan | No entry | |||
31-Mar | Bonds payable | 40000 | ||
Common Stock | 26000 | 130*40*5 | ||
Paid in capital in excess of par-CS | 14000 | |||
(conversion of bonds into CS) | ||||
1-Jun | Equipment | 70000 | ||
Preferred Stock | 50000 | 500*100 | ||
Paid in capital in excess of par-PS | 20000 | |||
(equipment procured against preferred share issue) | ||||
1-Sep | Treasury Stock | 130000 | 13*10000 | |
Cash | 130000 | |||
(purchased common stock as treasury stock @13) | ||||
12-Oct | Cash | 22500 | 1500*15 | |
Treasury Stock | 19500 | 1500*13 | ||
Paid in capital in excess of par-TS | 3000 | |||
(sale of 1500 treasury stock @ 15) | ||||
21-Nov | Cash | 70000 | 5000*14 | |
Common Stock | 25000 | 5000*5 | ||
Paid in capital in excess of par-CS | 45000 | |||
(issue of 5000 common stock @ 14) | ||||
28-Dec | Cash | 13200 | 1200*11 | |
Paid in capital in excess of par-TS | 2400 | |||
Treasury Stock | 15600 | 1200*13 | ||
(sale of 1200 treasury stock @ 11) |
T-Accounts: | |||
DEBIT | AMOUNT $ | CREDIT | AMOUNT $ |
Preferred Stock a/c | |||
CB | 550000 | OB | 500000 |
1-Jun | 50000 | ||
Common Stock a/c | |||
CB | 651000 | OB | 600000 |
31-Mar | 26000 | ||
21-Nov | 25000 | ||
Paid in capital in excess of par - PS a/c | |||
CB | 44000 | OB | 24000 |
1-Jun | 20000 | ||
Paid in capital in excess of par -CS a/c | |||
CB | 419000 | OB | 360000 |
31-Mar | 14000 | ||
21-Nov | 45000 | ||
Paid in capital in excess of par -TS a/c | |||
28-Dec | 2400 | 12-Oct | 3000 |
CB | 600 | ||
Retained Earnings a/c | |||
CB | 416000 | OB | 325000 |
31-Dec | 91000 | ||
Treasury Stock a/c | |||
1-Sep | 130000 | 12-Oct | 19500 |
28-Dec | 15600 | ||
CB | 94900 |
Stockholders' Equity Section of Balance Sheet: | |
Amount $ | |
Preferred stock: | |
Authorised: 20000 Par value 100 | |
Issued and outstanding 5500 | 550000 |
Common Stock: | |
Authorised: 300000 Par value 5 | |
Issued and outstanding 130200 | 651000 |
Paid in capital in excess of par - PS | 44000 |
Paid in capital in excess of par -CS | 419000 |
Paid in capital in excess of par -TS | 600 |
Retained Earnings | 416000 |
Less:Treasury Stock | -94900 |
Stockholders' Equity | 1985700 |
Stockholders’ Equity: Transactions and Balance Sheet Presentation The stockholders’ equity of Summit Corporation at January 1...
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 $500,000 Common stock, $15 par value, 100,000 shares authorized; 40,000 shares issued and outstanding 600,000 Paid-in capital in excess of par value-Preferred stock 24,000 Paid-in capital in excess of par value-Common stock 360,000 Retained earnings 325,000 Total Stockholders' Equity $1,809,000 The following transactions, among others, occurred during the...
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