Question

Learning Objectives 3, 4, 6 P13-44A Journalizing dividend and treasury stock transactions, preparing a statement of retained earnings, and preparing stockholders' equity The balance sheet of Goldstein Management Consulting, Inc. at December 31, 2017, reported the following stockholders' equity: 2. Retained Earnings Dec. 31, 2018 $126,550 Stockholders' Equity Paid-in Capital: Common Stock-$10 Par Value; 350,000 shares authorized, 32,000 shares issued and outstanding Paid-In Capital in Excess of Par-Common Total Paid-in Capital Retained Earnings Total Stockholders' Equity $ 320,000 330,000 650,000 160,000 $ 810,000 During 2018, Goldstein completed the following selected transactions: CHAPTER 13 Feb. 6 Declared a 15% stock dividend on common stock. The market value of Goldstein's stock was $25 per share. 15 Distributed the stock dividend. Jul 29 Purchased 2,300 shares of treasury stock at $25 per share. Nov. 27 Declared a 50.10 per share cash dividend on the common stock outstanding Requirements 1. Record the transactions in the general journal. 2. Prepare a retained earnings statement for the year ended December 31, 2018 Assume Goldstein's net income for the year was $90,000. 3. Prepare the stockholders' equity section of the balance sheet at December 31, 2018

Answer 1

Requirement 1: Prepare the journal entries as follows

Date	Account Title and Explanation	Debit	Credit
Feb. 6	Stock Dividends (32,000 shares × 15% × $25)	$120,000
	Common Stock Dividend Distributable (32,000 × 15% × $10)		$48,000
	Paid-in Capital in Excess of Par - Common		$72,000
	To record 15% stock dividend declared
Feb.15	Common Stock Dividend Distributable (32,000 × 15% × $10 per share)	$48,000
	Common stock		$48,000
	To record common stock dividend distributed
Jul. 29	Treasury Stock (2,300 × $25)	$57,500
	Cash		$57,500
	To record 2,300 shares of treasury stock purchased
Nov. 27	Cash Dividends ((32,000 + (32,000 × 15%) − 2,300) × $0.10)	$3,450
	Dividends Payable - Common		$3,450
	To record cash dividend declared on common stock outstanding

Requirement 2: Prepare the retained earnings statement as follows

GMC Inc
Statement of Retained Earnings
For the Year Ended December 31, 2018
Particulars	Amount	Amount
Retained Earnings, Beginning balance		$160,000
Add: Net income	$90,000
Deduct: Stock dividend	($120,000)
Deduct: Cash dividend	($3,450)
Net decrease		($33,450)
Retained Earnings, Ending balance		$126,550

Requirement 3: Prepare the stockholders' section of balance sheet as follows

GMC Inc
Balance Sheet
December 31, 2018
Stockholders' Equity:
Paid-in Capital
Common stock - $10 par value, 350,000 shares authorized
36,800 shares issued , 34,500 shares outstanding	$368,000
Paid-in Capital in Excess of Par - Common ($330,000 + $72,000)	$402,000
Total Paid-in Capital	$770,000
Retained Earnings	$126,550
Treasury Stock	($57,500)
Total Stockholders' Equity	$839,050