Question

Instructions a. Prepare in general journal form the entries to record the above transactions. b. Prepare the stockholders' equity section of the balance sheet at December 31, 2015. Use the format illustrated in Exhibit 12-6. Include a supporting schedule showing your computation of retained earnings at that date. Compute the maximum cash dividend per share that legally could be declared at December 31, 2015, without impairing the paid-in capital of Thompson Service. (Hint: The availability of retained earnings for dividends is restricted by the cost of treasury stock owned.) Tech Process, Inc., manufactures a variety of computer peripherals, such as tape drives and printers. Listed below are five events that occurred during the current year. 1. Declared a $1.00 per share cash dividend. 2. Paid the cash dividend. 3. Purchased 1,000 shares of treasury stock for $20.00 per share. 4. Reissued 500 shares of the treasury stock at a price of $18.00 per share. 5. Declared a 15 percent stock dividend. Instructions a. Indicate the effects of each of these events on the financial measurements listed in the four columnar headings listed below. Use the following code letters: I for increase, D for decrease, and NE for no effect

Answer 1

req a &b ) Effects of the events & reason:
Event	Current Assets	Stockholders' Equity	Net Income	Net Cash Flow	Reasons
1. Declaring dividend	NE	D	NE	I	RE reduces, Dividend payable increase
2. Dividend paid	D	NE	NE	D	Cash reduces, Dividend payable reduces
3. Purchase Treasury Stock	D	D	NE	D	Cash reduces, RE reduces
4. Reissue of Treasury Stock	I	I	NE	I	Cash increases, TS decreses
5. Stock dividend	NE	NE	NE	I	Stock / paid in capital increases, RE reduces