Question

The stockholders' equity accounts of Castle Corporation Journalize and post transactions, and prepare stockholders' equity section. P13.3A (LO 1, 2, 3) Financial Statement on January 1, 2020, were as follows. ( GLS GLS Preferred Stock (8%, $50 par, 10,000 shares authorized) Common Stock ($1 stated value, 2,000,000 shares authorized) Paid-in Capital in Excess of Par—Preferred Stock Paid-in Capital in Excess of Stated Value—Common Stock Retained Earnings Treasury Stock (10,000 common shares) $ 400,000 1,000,000 100,000 1,450,000 1,816,000 50,000 During 2020, the corporation had the following transactions and events pertaining to its stockholders' equity. Feb. 1 Apr. 14 Sept. 3 Nov. 10 Dec. 31. Issued 25,000 shares of common stock for $120,000. Sold 6,000 shares of treasury stock—common for $33,000. Issued 5,000 shares of common stock for a patent valued at $35,000. Purchased 1,000 shares of common stock for the treasury at a cost of $6,000. Determined that net income for the year was $452,000. No dividends were declared during the year. Instructions a. Journalize the transactions and the closing entry for net income. b. Enter the beginning balances in the accounts, and post the journal entries to the stockholders' equity accounts. (Use J5 for the posting reference.) c. Prepare a stockholders' equity section at December 31, 2020. C. Total stockholders' equity $5,350,000

Answer 1

Debit Credit Date Feb.1 120,000 Account Titles and Explanation Cash Common stock (25,000 shares x $ 1) Paid in capital in Excess of Stated Value - Common stock (120,000 - 25,000) (to record issue of shares) 25,000 95,000 Apr. 14 33,000 Cash Treasury stock Paid in capital from Treasury stock (33,000-30,000) (to record sale of treasury stock) 30,000 3,000 Sept.3 35,000 Patent Common stock (5,000 shares x $ 1) Paid in capital in Excess of Stated Value - Common stock (35,000 - 5,000) (to record issue of shares in exchange of patent) 5,000 30,000 Nov.10 Treasury stock Cash (to record purchase of treasury stock) 6,000 Dec.31 452,000 income summary Retained earnings (to record closing entry of net income) 452,000 Working Notes Treasury stock shares as on January 1, 2020 Value of treasury stock Value per treasury stock (50,000 / 10,000) cost of treasury stock sold (6,000 Ⓡ$ 5) 10,000 50,000 $ 30,000

Preferred Stock Date Explanation Jan.1 Balance Debit Credit Balance 400,000 Debit Credit Preferred Stock Date Explanation Jan.1 Balance Feb.1 Sept.3 25,000 5,000 Balance 1,000,000 1,025,000 1,030,000 Paid in capital in Excess of Par-Preferred stock Date Explanation Balance Debit Credit Balance 100,000 Jan.1 Credit Jan.1 Paid in capital in Excess of Stated Value - Common Stock Date Explanation Debit Balance Feb. 1 Sept.3 Balance 1,450,000 1,545,000 1,575,000 95,000 30,000 Paid in capital from Treasury stock Date Explanation Apr. 14 Debit Debit Credit 3,000 Balance 3,000 Debit Credit Retained Earnings Date Explanation Jan.1 Balance Dec.31 1,816,000 2,268,000 452,000

Debit Credit Treasury Stock Date Explanation Jan.1 Balance Apr. 14 Nov.10 Balance 50,000 20,000 26,000 30,000 6,000

400,000 1,030,000 1,430,000 CASTLE CORPORATION Balance Sheet (Partial) December 31, 2020 Stockholders' Equity Paid in Capital Capital Stock Preferred Stock Common stock Total Capital stock Additional paid in capital Paid in capital in excess of par - Preferred stock Paid in capital in excess of Stated value - Common stock Paid in capital from Treasury stock Total Additional paid in capital Total Paid in capital Retained Earnings Total Paid in capital and retained earnings Less: Treasury stock Total Stockholders' Equity 100,000 1,575,000 3,000 1,678,000 3,108,000 2,268,000 5,376,000 26,000 5,350,000 $