Question

Instructions Morrow Enterprises Inc. manufactures bathroom fixtures. Morrow Enterprises' stockholders' equity accounts, with balances on January 1, 20Y6, are as follows: Common Stock, $20 stated value (500,000 shares authorized, 375,000 shares issued) Paid-In Capital in Excess of Stated Value-Common Stock Retained Earnings Treasury Stock (25,000 shares, at cost) $7,500,000 825,000 33,600,000 450,000 The following selected transactions occurred during the year Jan. 22 Apr. Jun. Jul. 10 6 5 Paid cash dividends of $0.08 per share on the common stock. The dividend had been properly recorded when declared on December 1 of the preceding fiscal year for $28,000. Issued 75,000 shares of common stock for $24 per share. Sold all of the treasury stock for $26 per share. Declared a 4% Stock dividend on common stock, to be capitalized at the market price of the stock, which is $25 per share. Issued shares of stock for the Stock dividend declared on July 5. Purchased 30,000 shares of treasury stock for $19 per share. Declared a $0 10-per-share dividend on common stock Aug Nov. 15 23 28 Dec

Answer 1

Morrow Enterprises Journal entries Date Account 22-Jan Dividends Payable Cash Credit Calculation Debit 28,000 28,000 1,800,000 10-Apr Cash Common Stock Paid in Capital in Excess of Stated Value-Common Stock =75,000*24 =75,000*20 1,500,000 300,000 650,000 =25,000*26 6-Jun Cash Treasury Stock Paid in Capital from Treasury Stock 450,000 200,000 450,000 5-Jul Stock Dividends Stock Dividends Distributable Paid in Capital in Excess of Stated Value-Common Stock =18,000*25 =18,000*20 360,000 90,000 360,000 15-Aug Stock Dividends Distributable Common Stock 360,000 570,000 =30,000*19 23-Nov Treasury Stock Cash 570,000 43,800 As per below wkgs 28-Dec Cash Dividends Dividends Payable 43,800 1,125,000 31-Dec Income Summary Retained Earnings 1,125,000 493,800 31-Dec Retained Earnings Stock Dividends Cash Dividends 450,000 43,800 Workings Cash Dividends Opening Shares Shares Issued Subtotal 4% Stock Dividends Number of Common Shares Issued Treasury Stock Number of Common Shares o/s Cash Dividend per share Cash Dividends 450000*4% 375,000 75,000 450,000 18,000 468,000 (30,000) 438,000 0.10 43,800 438000*0.10

Credit Date Credit Morrow Enterprises T Accounts Date Debit Date Common Stock Op bal 10-Apr 15-Aug Date Debit Date Credit Paid in Capital in Excess of Stated Value-CS Op bal 10-Apr 300,000 5-Jul 90,000 Debit Date Credit Date Retained Earnings 450,000 Op bal 33,600,000 Op bal 43,800 31-Dec 1,125,000 23-Nov Debit Date Treasury Stock 450,000 6-Jun 570,000 7,500,000 1,500,000 360,000 450,000 31-Dec 31-Dec 34,231,200 Bal. Bal. 9,360,000 Paid in Capital from Treasury Stock 6-Jun 200,000 Bal. 1,215,000 Stock Dividends Distributable 15-Aug 360,000 5-Jul 360,000 Bal. Stock Dividends 450,000 31-Dec 570,000 Cash Dividends 43,800 31-Dec 5-Jul 450,000 28-Dec 43,800 Bal. 200,000 Bal. - Bal. . Bal. .

Morrow Enterprises Statement of Stockholders Equity For the year ended December 31, 2016 Paid in Capital in Excess Paid in Capital from Common Stock of Stated Value-CS Treasury Stock 7,500,000 825,000 1,500,000 300,000 Balances, January 1 Issued common stock Net Income Cash Dividends Stock Dividends Sale of Treasury stock Purchase of Treasury stock Balances, December 31 Retained Earnings Treasury Stock Total Equity 33,600,000 (450,000) 41,475,000 1,800,000 1,125,000 1,125,000 (43,800) (43,800) (450,000) 450,000 650,000 (570,000) (570,000) 34,231,200 (570,000) 44,436,200 360,000 90,000 200,000 9,360,000 1,215,000 200,000

Morrow Enterprises Balance Sheet As of December 31, 2016 Stockholders Equity Paid in Capital Common Stock - $20 stated value (500,000 shares authorized, 468,000 shares issued & 438,000 shares outstanding) Paid in Capital in Excess of Stated Value-Common Stock Paid in Capital from Sale of Treasury Stock Total Paid in Capital Retained Earnings Total Less: Treasury Stock (30,000 shares @ cost $19 per share) Total Stockholders Equity 9,360,000 1,215,000 200,000 10,775,000 34,231,200 45,006,200 (570,000) 44,436,200