Question

Exercise 11-21 Cash dividends, treasury stock, and statement of retained earnings LO C3, P2, P3 Alexander Corporation reports the following components of stockholders' equity at December 31, 2018. Common stock-$25 par value, 50,000 shares authorized, 33,000 shares issued and outstanding Paid-in capital in excess of par value, common stock Retained earnings Total stockholders' equity $ 825,000 66,000 350,000 $1,241,000 During the year, the following transactions affected its stockholders' equity accounts. Jan. 2 Purchased 3,300 shares of its own stock at $25 cash per share. Jan. 7 Directors declared a $1.50 per share cash dividend payable on February 28 to the February 9 stockholders of record. Feb. 28 Paid the dividend declared on January 7. July 9 Sold 1,320 of its treasury shares at $30 cash per share. Aug. 27 Sold 1,650 of its treasury shares at $20 cash per share. Sept. 9 Directors declared a $2 per share cash dividend payable on October 22 to the September 23 stockholders of record. Oct. 22 Paid the dividend declared on September 9. Dec. 31 closed the $55,000 credit balance (from net income) in the Income Summary account to Retained Earnings. Required: 1. Prepare journal entries to record each of these transactions. 2. Prepare a statement of retained earnings for the year ended December 31, 2019. 3. Prepare the stockholders' equity section of the company's balance sheet as of December 31, 2019.

Answer 1

1
Date	General Journal	Debit	Credit
2-Jan	Treasury stock, common	82,500		=3300*25
	Cash		82,500
7-Jan	Retained earnings	44,550		=(33000-3300)*1.50
	Common dividend payable		44,550
28-Feb	Common dividend payable	44,550
	Cash		44,550
9-Jul	Cash	39,600		=1320*30
	Treasury stock, common		33,000	=1320*25
	Paid-in capital, treasury stock		6,600
27-Aug	Cash	33,000		=1650*20
	Paid-in capital, treasury stock	6,600
	Retained earnings	1,650
	Treasury stock, common		41,250	=1650*25
9-Sep	Retained earnings	65,340		=(33000-3300+1320+1650)*2
	Common dividend payable		65,340
22-Oct	Common dividend payable	65,340
	Cash		65,340
31-Dec	Income summary	55,000
	Retained earnings		55,000
2
	ALEXANDER CORPORATION
	Statement of Retained Earnings
	For Year Ended December 31
	Retained earnings, December 31, 2018	350,000
	Add: Net income	55,000
		405,000
	Less: Cash dividends declared	(109,890)
	Less: Treasury stock reissuances	(1,650)
	Retained earnings, December 31, 2019	293460
3
	ALEXANDER CORPORATION
	Stockholders’ Equity Section of the Balance Sheet
	December 31
	Common stock - $25 par value	825,000
	Paid-in capital in excess of par value, common stock	66,000
	Retained earnings	293,460
	Less: Cost of treasury stock	(8,250)
	Total stockholders’ equity	1,176,210