Question

Alexander Corporation reports the following components of stockholders' equity on December 31, 2016: Common stock-$25 par value, 70,000 shares authorized, 45,000 shares issued and outstanding Paid-in capital in excess of par value, common stock Retained earnings $1,125,000 90,000 392,000 $1,607,000 Total stockholders' equity In year 2017, the following transactions affected its stockholders' equity accounts. 2 Purchased 4,500 shares of its own stock at $25 cash per share. 7 Directors declared a $1.50 per share cash dividend payable on February 28 to the February 9 stockholders of record. 28 Paid the dividend declared on January 7 9 Sold 1,800 of its treasury shares at $30 cash per share. 27 Sold 2,250 of its treasury shares at $20 cash per share. 9 Directors declared a $2 per share cash dividend payable on October 22 to the September 23 stockholders of record. 22 Paid the dividend declared on September 9 31 Closed the $67,000 credit balance (from net income) in the Income Summary account to Retained Earnings. Jan Jan Feb July Aug. Sept. Oct Dec. Required: 1. Prepare journal entries to record each of these transactions for 2017. 2. Prepare a statement of retained earnings for the year ended December 31, 2017. 3. Prepare the stockholders' equity section of the company's balance sheet as of December 31, 2017

Answer 1

Solution 1:

Alexander Corporation - Journal Entries
Date	Particulars	Debit	Credit
2-Jan	Treasury Stock A/c Dr	$112,500.00
	To Cash		$112,500.00
	(Being 4500 shares of treasury stock purchased at $25 per share)
7-Jan	Retained Earnings Dr	$60,750.00
	To Dividend payable [(45000 - 4500)*1.50]		$60,750.00
	(Being dividend declared)
28-Feb	Dividend Payable Dr	$60,750.00
	To Cash		$60,750.00
	(Being dividend paid)
9-Jul	Cash A/c Dr (1800*30)	$54,000.00
	To Treasury Stock (1800*25)		$45,000.00
	To Additional Paid in Capital (1800*$5)		$9,000.00
	(Being 1800 shares of treasury stock sold at $30 per share)
27-Aug	Cash A/c Dr (2250*20)	$45,000.00
	Additional Paid in Capital A/c Dr	$9,000.00
	Retained Earnings Dr (Balancing figure)	$2,250.00
	To Treasury Stock (2250*$25)		$56,250.00
	(Being 2150 shares of treasury stock sold at $20 per share)
9-Sep	Retained Earnings Dr	$89,100.00
	To Dividend payable [(45000 - 450)*2]		$89,100.00
	(Being dividend declared)
22-Oct	Dividend Payable Dr	$89,100.00
	To Cash		$89,100.00
	(Being dividend paid)
31-Dec	Income summary Dr	$67,000.00
	To Retained Earnings		$67,000.00
	(Being income transferred to retained earnings)

Solution 2:

Alexander Corporation - Statement of Retained Earnings on 31.12.2017
Particulars	Amount
Opening balance	$392,000.00
Add: Income for 2017	$67,000.00
	$459,000.00
Less: Dividend Paid ($60,750 + $89,100)	$149,850.00
Less: Loss on sale of treasury stock	$2,250.00
Ending balance of Retained Earnings	$306,900.00

Solution 3:

Stockholder Equity Section of Balance sheet
Alexander Corporation at December 31, 2017
Particulars	Amount
Stockholders Equity:
Common stock—$25 par value, 70,000 shares authorized, 45,000 shares issued and outstanding	$1,125,000.00
Paid-in capital in excess of par value, common stock	$90,000.00
Total contributed Capital	$1,215,000.00
Retained Earnings	$306,900.00
Treasury stock (430*$25)	-$11,250.00
Total Stockholder's Equity	$1,510,650.00