Question

Stockholders' Equity: Transactions and Balance Sheet Presentation The stockholders' equity accounts of Willis Corporation at January 1 appear below: 8 Percent preferred stock, $10 par value. 50,000 shares authorized: 6,800 shares issued and outstanding 568,000 Common stock 510 par value 200,000 shares authorized: 50,000 shares issued and outstanding 500,000 Pald-in capital in excess of par value-Preferred stock 68,000 Paid-in capital in excess of par value-Common stock 200,000 Retained earnings 270,000 During the year, the following transactions occurred: Jan. 10 issued 35,000 shares of common stock for $18 cash per share. 23 Purchased 10,000 shares of common stock as treasury stock at $19 per share. Mar. 14 Sold one-half of the treasury shares acquired January 23 for $21 per share. July 15 Issued 3.500 shares of preferred stock in exchange for equipment with a fair market value of $128,000. Nov. 15 Sold 1.000 of the treasury shares acquired January 23 for $24 per share. Dec. 31 Closed the net income of $59,000 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 Preferred Stock Common Stock Jan. 10 Jan. 23 Jul. 15 Jan. 10 Mar.14 Bal. Bal Beg, Beg.

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

b. Prepare journal entries to record the foregoing transactions and post to T-accounts above in part a. 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.

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

Do not use negative signs with your answers.

Answer 1

ANSWER

Part 1 Cash Common Stock Credit Debit Credit Debit $ 190,000 $ 630,000 $500,000 $350,000 Jan 10 Jan 23 Beginning balance $ 105,000 $ 24,000 Jan 10 Mar 14 Nov 15 $ 850,000 Ending Balance $569,000 Ending Balance Preferred Stock Equipment Debit Credit Debit $68,000 Credit Beginning balance $ 128,000 $35,000 Jul 15 Jul 15 $103,000 Ending Balance $ 128,000 Ending Balance Paid in capital in excess of par Common Stock Credit Debit $200,000 Treasury Stock Beginning balance $280,000 Debit Credit Jan 10 $ 190,000 $95,000 $19,000 Jan 23 Mar 14 $480,000 Ending Balance Nov 15 Paid in capital in excess of par Preferred Stock $76,000 Ending Balance Debit Credit $68,000 $93,000 Beginning balance Retained Earning Jul 15 Credit Debit $ 270,000 $ 59,000 $161,000 Beginning balance Ending Balance Dec 31 Paid in capital in excess of par Treasury $ 329,000 Ending Balance Debit Credit $10,000 $ Mar 14 Nov 15 5,000 $15,000 Ending Balance

Part 2 Date Debit Credit Account $630,000 Cash Jan 10 $350,000 $ 280,000 Jan 10 Common Stock par value-Common Paid in capital in excess of Jan 10 $190,000 Treasury Stock Jan 23 $190,000 Cash Jan 23 $105,000 Cash Mar 14 Treasury Stock Paid in capital in excess of par value-Treasury Mar 14 95,000 $ 10,000 Mar 14 $128,000 Jul 15 Equipment Jul 15 Preferred Stock 35,000 $ Jul 15 Paid in capital in excess of par value-Preferred 93,000 $ 24,000 Cash Nov 15 $ Treasury Stock Nov 15 19,000 par value-Treasury Paid in capital in excess of Nov 15 5,000 $ 59,000 Dec 31 Net Income Retained Earning Dec 31 59,000 Part 3 Paid in capital: $103,000 Preferred Stock $ 850,000 $953,000 Common Stock Additional paid in capital: $ 161,000 $ 480,000 $ 15,000 Paid in capital in excess of par value-Preferred Paid in capital in excess of par value-Common $ 656,000 $ 1,609,000 $329,000 $ 1,938,000 Paid in capital in excess of par value-Treasury Total Paid in capital Retained Earning Less: Treasury Stock 76,000 Stockholder's Equity $ 2,014,000 n

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