Question

Stockholders’ Equity: Transactions and Balance Sheet Presentation

The stockholders’ equity accounts of Cooper Corporation at January 1 follow:

Common stock, $1 par value, 350,000 shares authorized;
150,000 shares issued and outstanding	$150,000
Paid-in capital in excess of par value (common stock)	600,000
Retained earnings	366,000

During the year, the following transactions occurred:

Jan.	5	Issued 20,000 shares of common stock for $15 cash per share.
	18	Purchased 4,000 shares of common stock as treasury stock at $14 cash per share.
Mar.	12	Sold one-fourth of the treasury shares acquired January 18 for $17 per share.
July	17	Sold 600 shares of the remaining treasury stock for $12 per share.
Oct.	1	Issued 5,000 shares of eight percent, $25 par value preferred stock for $35 cash per share.
		These are the first preferred shares issued out of 50,000 authorized shares.
Dec.	31	Closed the net income of $170,000 to the Retained Earnings account.

Required

a. Set up T-accounts for the stockholders’ equity accounts as of the beginning of the year and enter the January 1 balances.

HINT: Complete part b. below prior to entering T-account data.

Cash
Jan.05	Answer	Answer
Jan.18	Answer	Answer
Mar.12	Answer	Answer
Jul.17	Answer	Answer
Oct.01	Answer	Answer

Preferred Stock
Oct.01	Answer	Answer
Bal.	Answer	Answer

Common Stock
Beg.	Answer	Answer
Jan.05	Answer	Answer
Bal	Answer	Answer

Paid-in-Capital in Excess of Par Value - Preferred Stock
Oct.01	Answer	Answer
Bal	Answer	Answer

Paid-in-Capital in Excess of Par Value - Common Stock
Beg.	Answer	Answer
Jan.5	Answer	Answer
Bal	Answer	Answer

Paid-in-Capital from Treasury Stock
Mar.12	Answer	Answer
Jul.17	Answer	Answer
Bal.	Answer	Answer

Treasury Stock
Jan.18	Answer	Answer
Mar.12	Answer	Answer
Jul.17	Answer	Answer
Bal.	Answer	Answer

Retained Earnings
Bal.	Answer	Answer
Dec.31	Answer	Answer
Bal.	Answer	Answer

b. Prepare journal entries to record the foregoing transactions and post to T-accounts (set up any additional T-accounts needed). Do not prepare the journal entry for the Dec. 31 transaction, but post the appropriate amount to the Retained Earnings T-account. Determine the ending balances for the stockholders’ equity accounts.

General Journal
Date	Description	Debit	Credit
Jan.05	AnswerCashCommon StockEquipmentPaid-in-Capital from Treasury StockPaid-in-Capital in Excess of Par Value - Common StockPaid-in-Capital in Excess of Par Value - Preferred StockPreferred StockTreasury Stock – Common	Answer	Answer
	Common Stock	Answer	Answer
	AnswerCashCommon StockEquipmentPaid-in-Capital from Treasury StockPaid-in-Capital in Excess of Par Value - Common StockPaid-in-Capital in Excess of Par Value - Preferred StockPreferred StockTreasury Stock – Common	Answer	Answer
	Issued common stock.
Jan.18	AnswerCashCommon StockEquipmentPaid-in-Capital from Treasury StockPaid-in-Capital in Excess of Par Value - Common StockPaid-in-Capital in Excess of Par Value - Preferred StockPreferred StockTreasury Stock – Common	Answer	Answer
	AnswerCashCommon StockEquipmentPaid-in-Capital from Treasury StockPaid-in-Capital in Excess of Par Value - Common StockPaid-in-Capital in Excess of Par Value - Preferred StockPreferred StockTreasury Stock – Common	Answer	Answer
	Purchased treasury stock.
Mar.12	AnswerCashCommon StockEquipmentPaid-in-Capital from Treasury StockPaid-in-Capital in Excess of Par Value - Common StockPaid-in-Capital in Excess of Par Value - Preferred StockPreferred StockTreasury Stock – Common	Answer	Answer
	Treasury Stock - Common	Answer	Answer
	AnswerCashCommon StockEquipmentPaid-in-Capital from Treasury StockPaid-in-Capital in Excess of Par Value - Common StockPaid-in-Capital in Excess of Par Value - Preferred StockPreferred StockTreasury Stock – Common	Answer	Answer
	Sold treasury stock.
Jul.17	AnswerCashCommon StockEquipmentPaid-in-Capital from Treasury StockPaid-in-Capital in Excess of Par Value - Common StockPaid-in-Capital in Excess of Par Value - Preferred StockPreferred StockTreasury Stock – Common	Answer	Answer
	Paid-in-Capital from Treasury Stock	Answer	Answer
	AnswerCashCommon StockEquipmentPaid-in-Capital from Treasury StockPaid-in-Capital in Excess of Par Value - Common StockPaid-in-Capital in Excess of Par Value - Preferred StockPreferred StockTreasury Stock – Common	Answer	Answer
	To record sale of treasury stock.
Oct.01	AnswerCashCommon StockEquipmentPaid-in-Capital from Treasury StockPaid-in-Capital in Excess of Par Value - Common StockPaid-in-Capital in Excess of Par Value - Preferred StockPreferred StockTreasury Stock – Common	Answer	Answer
	AnswerCashCommon StockEquipmentPaid-in-Capital from Treasury StockPaid-in-Capital in Excess of Par Value - Common StockPaid-in-Capital in Excess of Par Value - Preferred StockPreferred StockTreasury Stock – Common	Answer	Answer
	Paid-in-Capital in Excess of Par Value - Preferred Stock	Answer	Answer
	To record issue of preferred stock.

c. Prepare the December 31 stockholders’ equity section of the balance sheet.

Do not use negative signs with your answers.

Stockholders' Equity
	Paid in Capital
	AnswerPreferred StockCommon StockRetained EarningsTotal Stockholders' EquityTotal Paid-in-CapitalLess: Treasury Stock - Common	Answer
	AnswerPreferred StockCommon StockRetained EarningsTotal Stockholders' EquityTotal Paid-in-CapitalPaid-in-Capital from Treasury StockLess: Treasury Stock - Common	Answer	Answer
	Additional Paid-in-Capital
	Paid-in-Capital in Excess of Par value -Preferred Stock	Answer
	Paid-in-Capital in Excess of Par value - Common Stock	Answer
	AnswerPreferred StockCommon StockRetained EarningsTotal Stockholders' EquityTotal Paid-in-CapitalPaid-in-Capital from Treasury StockLess: Treasury Stock - Common	Answer	Answer
	Total Paid-in-Capital		Answer
	AnswerPreferred StockCommon StockRetained EarningsTotal Stockholders' EquityTotal Paid-in-CapitalPaid-in-Capital from Treasury StockLess: Treasury Stock - Common		Answer
			Answer
	AnswerPreferred StockCommon StockRetained EarningsTotal Stockholders' EquityTotal Paid-in-CapitalPaid-in-Capital from Treasury StockLess: Treasury Stock - Common		Answer
	AnswerPreferred StockCommon StockRetained EarningsTotal Stockholders' EquityTotal Paid-in-CapitalPaid-in-Capital from Treasury StockLess: Treasury Stock - Common		Answer

Answer 1

b) Journal entries:
Date	Accounts Title	Debit $	Credit $
5-Jan	Cash	300000
	Common Stock		20000
	Paid in capital in excess of par value (CS)		280000
	(being 20000 common shares issued @ $15)
18-Jan	Treasury Stock	56000
	Cash		56000
	(being purchase of 4000 common stock as Treasury stock @ 14)
12-Mar	Cash	17000
	Treasury Stock		14000
	Paid in capital in excess of par value (TS)		3000
	(being sale of 1000 Common stock held as Treasury stock @ 17)
17-Jul	Cash	7200
	Paid in capital in excess of par value (TS)	1200
	Treasury Stock		8400
	(being sale of 600 Common stock held as Treasury stock @ 12)
1-Oct	Cash	175000
	8% Preferred Stock		125000
	Paid in capital in excess of par value (TS)		50000
	(issue 5000 preferred stock @ 35)
31-Dec	Income Summary	170000
	Retained Earnings		170000
	(being net income transferred to Retained earnings)

a) t- Accounts:
DEBIT	AMOUNT $	CREDIT	AMOUNT $
Cash a/c
5-Jan	300000	18-Jan	56000
12-Mar	17000	CB	443200
17-Jul	7200
1-Oct	175000
Preferred Stock a/c
1-Oct	125000
Common Stock a/c
CB	170000	OB	150000
		5-Jan	20000
Paid in capital in excess of par value - PS
		1-Oct	50000
Paid in capital in excess of par value - CS
CB	880000	OB	600000
		5-Jan	280000
Paid in capital in excess of par value - TS
17-Jul	1200	12-Mar	3000
CB	1800
Treasury Stock a/c
18-Jan	56000	12-Mar	14000
		17-Jul	8400
		CB	33600
Retained Earnings a/c
CB	536000	OB	366000
		31-Dec	170000

C) Stockholders' Equity:
	Amount $
Paid in Capital:
Common Stock : Authorised 350000 shares, Issued 170000 @ $1 par	170000
8% Preferred Stock : Authorised 50000 shares, issued 5000 @ $25 par	125000
Additional Paid in Capital:
Paid in capital in excess of par value - CS	880000
Paid in capital in excess of par value - PS	50000
Paid in capital in excess of par value - TS	1800
Total Paid in Capital	1226800
Retained Earnings	536000
Total	1762800
Less: Treasury Stock	33600
Shareholders' Equity	1729200