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 (500,000 shares authorized, 340,000 shares issued) Paid-In Capital in Excess of Stated Value-Common Stock Retained Earnings Treasury Stock (34,000 shares, at cost) The following selected transactions occurred during the year: $3,400,000 650,000 7,720,000 476,000 Jan. 22. Paid cash dividends of $0.12 per share on the common stock. The dividend had been properly recorded when declared on December 1 of the preceding fiscal year for $36,720 Apr. 10. Issued 65,000 shares of common stock for $1,170,000. 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 21,000 shares of treasury stock for $19 per share Dec. 28. Declared a $0.15-per-share dividend on common stock. 31. Closed the credit balance of the income summary account, $8,029,000. 31. Closed the two dividends accounts to Retained Earnings.

Common Stock
		Jan. 1 Bal.	3,400,000
		Apr. 10
		Aug. 15
		Dec. 31 Bal.

Paid-In Capital in Excess of Stated Value-Common Stock
		Jan. 1 Bal.	650,000
		Apr. 10
		July 5
		Dec. 31 Bal.

Retained Earnings
Dec. 31		Jan. 1 Bal.	7,720,000
		Dec. 31
		Dec. 31 Bal.

Treasury Stock
Jan. 1 Bal.	476,000	June 6
Nov. 23
Dec. 31 Bal.

Paid-In Capital from Sale of Treasury Stock
		June 6

Stock Dividends Distributable
Aug. 15		July 5

Stock Dividends
July 5		Dec. 31

Cash Dividends
Dec. 28		Dec. 31

Answer 1

Answer:

The transactions are recorded to required T accounts and where required balances are given:

Common Stock Jan. 1 Bal 3,400,000 $650,000 $202,500 $4,252,500 10 Aug. 15 Dec. 31 Bal Jan. 1 Bal Jul. 05 Paid-In Capital in Excess of Stated Value-Common Stock $650,000 $520,000 $202,500 $1,372,500 10 Dec. 31 Bal Retained Earnings $462,600|Jan. 1 Bal Dec. 31 Dec. 31 Dec. 31 Bal 7,720,000 $8,029,000 $15,286,400 Treasury Stock 476,000l Jun. 6 Jan. 1 Bal Nov. 23 Dec. 31 Bal 476,000 $399,000 $399,000 Paid-ln Capital from Sale of Treasury Stock Jun. 6 Dec. 31 Bal $102,000 $102,000 $202,500 $405,000 $57,600 Stock Dividends Distributable Aug. 15 S202,500 Jul. 5 Stock Dividends $405,000 Dec. 31 Cash Dividends $57,600 Dec. 31 Jul. 5 Dec. 28

Workings:

Journal entries:

Date General Journal Debit Credit Jan. 22Dividend Payable $36,720 Cash $36,720 (to record payment of cash dividends) Apr. 10Cash $1,170,000 $650,000 $520,000 Common Stock Paid-In Capital in Excess of Stated Value-Common Stock (to record issue of common shares 65,000 at $1170000) Jun. 6 Cash $578,000 $476,000 $102,000 Treasury Stock Paid-In Capital from Sale of Treasury Stock (to record sales of treasury shares) Stock Dividends Jul. 5 $405,000 $202,500 $202,500 Stock Dividends Distributable Paid-In Capital in Excess of Stated Value-Common Stock (To record declaration of stock dividends 5% of 405,000 shares @ $20 per share) Aug.15Stock Dividends Distributable $202,500 Common Stock $202,500 Nov. 23Treasury Stock $399,000 Cash $399,000 (to record purchase of 21,000 shares @$19) Dec. 28 Cash Dividends $57,600 Cash Dividend payable $57,600 (to record dividend @0.15 per share on 384,000 shares Income Summary Account To close income summary account to retained earnings) Dec. 31 $8,029,000 Retained Earnings $8,029,000 Dec. 31Retained Earnings $462,600 Stock Dividend Cash Dividend (to record closure of dividend accounts to retained earnings) $405,000 $57,600

All relevant T accounts:

Common Stock Jan. 1 Bal 3,400,000 S650,000 S202,500 $4,252,500 10 Aug. 15 Dec. 31 Bal Jan. 1 Bal Jul. 05 Paid-In Capital in Excess of Stated Value-Common Stock $650,000 520,000 S202,500 $1,372,500 10 Dec. 31 Bal Retained Earnings $462,600|Jan. 1 Bal Dec. 31 Dec. 31 Dec. 31 Bal 7,720,000 S8,029,000 $15,286,400 Jan. 1 Bal Nov. 23 Dec. 31 Bal Treasury Stock 476,000l Jun. 6 S399,000 476,000 $399,000 Paid-ln Capital from Sale of Treasury Stock Jun. 6 Dec. 31 Bal $102,000 $102,000 S202,500 $405,000 S57,600 Stock Dividends Distributable Aug. 15 $202,500 Jul. 5 Stock Dividends $405,000 Dec. 31 Cash Dividends $57,600 Dec. 31 Jul. 5 Dec. 28 Cash Dividends Pavable Jan. 1 Bal $36,720 Jan. 22 $36,720 $57,600 $57,600 Dec. 28 Dec. 31 Bal Cash Jan 1.Bal Apr. 10 Jun. 6 $36,720 $399,000 Jan. 22 $1,170,000 Nov. 23 $578,000 Income Summary Account Dec. 31 $8,029,000 Dec. 31 $8,029,000