Question

Entries for Selected Corporate Transactions Morrow Enterprises Inc. manufactures bathroom fixtures. Morrow Enterprises' stockholders' equity accounts, with balances on January 1, 20Y6, are as follows: Common Stock, $10 stated value (900,000 shares authorized, 600,000 shares issued) $6,000,000 Paid-In Capital in Excess of Stated Value-Common Stock 1,150,000 Retained Earnings 13,620,000 Treasury Stock (60,000 shares, at cost) 840,000 The following selected transactions occurred during the year: Jan. 22. Paid cash dividends of $0.15 per share on the common stock. The dividend had been properly recorded when declared on December 1 of the preceding fiscal year for $81,000. Apr. 10. Issued 115,000 shares of common stock for $2,070,000. June 6. Sold all of the treasury stock for $17 per share July 5. Declared a 5% Stock dividend on common stock, to be capitalized at the market price of the stock, which is $20 per share. Aug. 15. Issued shares of stock for the stock dividend declared on July 5 Nov. 23. Purchased 38,000 shares of treasury stock for $19 per share. Dec. 28. Declared a $0.18-per-share dividend on common stock. 31, Closed the credit balance of the income summary account, $14,165,000 31. Closed the two dividends accounts to Retained Earnings. Required: 1. The January 1 balances have been entered in T accounts for the stockholders' equity accounts. Record the above transactions in the T accounts and provide the December 31 balance where appropriate. If required, round to one decimal place. Common Stock Dan. 1 Bal Apr. 10 6,000,000 V 1,150,000 Aug. 15 286,000 X 7,436,000 x рес. 31 Bal. Paid-In Capital in Excess of Stated Value-Common Stock Dan. 1 Bal. Apr. 10 1,150,000 920,000 286,000 X July 5 2,356,000 X Dec. 31 Bal.

Answer 1

1)

Common stock
		Jan. 1 Bal.	$6000000
		Apr 10	1150000
		Aug 15	357500
		Dec 31 Bal.	$7507500
Paid-in-capital in excess of Stated value- Common stock
		Jan 1 Bal.	$1150000
		Apr 10	920000
		July 5	357500
		Dec 31 Bal.	$2427500
Retained Earnings
Dec 31	843295	Jan 1 Bal.	$13620000
		Dec 31	14165000
		Dec 31 Bal.	$26941705
Treasury Stock
Jan 1 Bal.	$840000	June 6	840000
Nov 23	722000
Dec 31 Bal.	$722000
Paid in Capital from sale of Treasury stock
		June 6	180000
Stock Dividends Distributable
Aug 15	357500	July 5	357500
Stock Dividends
July 5	715000	Dec 31	715000
Cash Dividends
Dec 28	128295	Dec 31	128295

2)

July 5

Date	Account	Debit	Credit
July 5	Stock Dividends (715000*5%*$20)	$715000
	Stock Dividends Distributable (715000*5%*$10)		$357500
	Paid in capital in excess of stated value- Common stock (715000-357500)		$357500
	(To record stock dividend declared)

Shares outstanding for stock dividend= 600000-60000+115000+60000= 715000 shares

Dec 28

Date	Account	Debit	Credit
Dec 28	Cash Dividends (712750*$0.18)	$128295
	Cash Dividends Payable		$128295
	(To record dividend declared on common stock)

Shares outstanding for cash dividend= 600000-60000+115000+60000+35750-38000= 712750 shares

Dec 31

Date	Account	Debit	Credit
Dec 31	Retained earnings (715000+128295)	$843295
	Stock dividends		$715000
	Cash dividends		$128295
	(To close stock dividend and cash dividend to retained earnings)

3)

Morrow Enterprises Inc.
Retained Earnings Statement
For the Year Ended December 31, 20Y6
Retained earnings, January 1, 20Y6		$13620000
Net income	$14165000
Cash dividends	(128295)
Stock dividends	(715000)
Change in retained earnings		13321705
Retained earnings, December 31, 20Y6		$26941705

4)

Morrow Enterprises Inc.
Balance Shhet
December 31, 20Y6
Stockholders' equity
Paid-in-capital:
Common stock- $10 stated value (900000 shares authorized, 750750 shares issued)	$7507500
Excess of issue price over stated value	2427500
From sale of treasury stock	180000
Total paid-in-capital		10115000
Retained earnings		26941705
Total		37056705
Treasury stock (38000 shares, at cost)		(722000)
Total Stockholders' Equity		$36334705