Question

At December 31, 2018, Eastern Corporation reported the stockholders' equity accounts shown here (with dollar amounts in millions, except per-share amounts). (Click the icon to view the data.) Eastern's 2019 transactions included A (Click the icon to view the transactions.) Requirements 1. Journalize Eastern's transactions in parts b, c, d, and e. Explanations are not required. 2. What was the overall effect of these transactions (parts a-e) on Eastern's stockholders' equity? Requirement 1. Journalize Eastern's transactions in b, c, d, and e. Explanations are not required. (Enter amounts in millions as provided to you in the problem statement. Record debits first, then credits. Exclude explanations from any journal entries.) b. Issuance of 8 million shares of common stock for $14.00 per share. Journal Entry Accounts Date Debit Credit X - - X More Info Data Table a. Net income, $448 million b. Issuance of 8 million shares of common stock for $14.00 per share c. Purchase of 4 million shares of treasury stock for $48 million d. Sold 3 million of the treasury shares purchased in part c for $39 million e. Declaration and payment of cash dividends of $36 million Common stock, $3.00 par value per share, 30 million shares issued ... Paid-in capital in excess of par value Retained earnings Treasury stock, at cost Total stockholders' equity 375 Print Done Print Done

Answer 1

Answer to Question 1:

Requirement 1 Debit ($ in Date Account Name millions) Income Summary $ 448 Retained Earnings (To transfer the net income to retained earnings) Credit ($ in millions) a $ 448 Cash (8 X $14) $ 112 Paid in capital in excess of par (8 X (14 - 3) Common Stock (To record issue of shares @ $14.00 per share) $ $ 88 24 Treasury Stock $ 48 Cash $ 48 (To record purchase of own stock - 4 million shares for 48 million) Purchase price per share = $48 million/4 million = $12 per share

Answer to Question 1:

d Requirement 1 Debit Credit ($ in ($ in Date Account Name millions) millions) Cash $ 39 Paid in Capital from Sale of Treasury Stock ((13 - 12) X 3 million shares)) 3 Treasury Stock (3 x $12) $ 36 (To record sale of treasury stock for 39 million) Purchase price per share = $39 million/3 million = $12 per share Cash Dividends $ 36 Cash (To record declaration and payment of dividend) $ 36

Answer to Question 2:

Question 2 a - It will increase stockholders equity (Net Income will be added to retained Earnings) b - It will increase stockholders equity (Issue of common stock increase the shareholders equity) c - It will decrease stockholders equity (Treasury stock is subtracted to calculate shareholders equity. Any increase in treasury stock will result in a lower shareholder equity) d - It will increase stockholders equity (Treasury stock is subtracted to calculate shareholders equity. Any decrease in treasury stock will result in a higher shareholder equity) e - It will decrease stockholders equity Cash dividends decrease retained earnings, hence it will decrease stockholders equity.