Question

Alexander Corporation reports the following components of stockholders’ equity on December 31, 2017.

Common stock—$25 par value, 70,000 shares authorized, 45,000 shares issued and outstanding	$	1,125,000
Paid-in capital in excess of par value, common stock		90,000
Retained earnings		392,000
Total stockholders’ equity	$	1,607,000

In year 2018, the following transactions affected its stockholders’ equity accounts.

Jan.		2		Purchased 4,500 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 1,800 of its treasury shares at $30 cash per share.
Aug.		27		Sold 2,250 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 $67,000 credit balance (from net income) in the Income Summary account to Retained Earnings.

Required:
1. Prepare journal entries to record each of these transactions for 2018.
2. Prepare a statement of retained earnings for the year ended December 31, 2018.
3. Prepare the stockholders’ equity section of the company’s balance sheet as of December 31, 2018.

Answer 1

A B C 1 journal account titles and explanation date debit credit 02-Jan $ 112,500 treasury stock cash (to record purchase of treasury stock) $ 112,500 07-Jan $ 60,750 dividends dividends payable (to record dividends declared) $ 60,750 $ 60,750 28-Feb dividends payable cash (to record dividends paid) $ 60,750 $ 54,000 09-Jul cash treasury stock paid in capital-treasury stock (to record sale of treasury stock) $ 45,000 $9,000

A B C 1 . journal account titles and explanation date debit credit 27-Aug cash paid in capital-treasury stock retained earnings treasury stock (to record sale of treasury stock) $ 45,000 $9,000 $2,250 $ 56,250 $ 89,100 09-Sep dividends dividends payable (to record dividends declared) $ 89,100 $ 89,100 22-Oct dividends payable cash (to record dividends paid) $ 89,100 31-Dec $ 67,000 income summary retained earnings (to close income summary account) $ 67,000

Alexander Corporation statement of retained earnings for the year ended December 31, 2018 retained earnings, Janaury 1, 2018 add: net income $ 392,000 $ 67,000 $ 459,000 -$ 149,850 -$2,250 $ 306,900 less: cash dividends declared less: loss on sale of treasury stock retained earnings, December 31, 2018 $ 1,125,000 Alexander Corporation Balance Sheet (Partial) as of December 31, 2018 Stockholders' Equity Common stock-$25 par value, 70,000 shares authorized, 45,000 shares issued and outstanding Paid-in capital in excess of par value, common stock Total Paid-in capital Retained Earnings Total Paid-in capital and Retained Earnings Less: Treasury Stock Total Stockholders' Equity $ 90,000 $ 1,215,000 $ 306,900 $ 1,521,900 $ 11,250 $ 1,510,650

for formulas and calculations, refer to the image below -

fx 1 в с journal account titles and explanation date debit credit -4500*25 43467 treasury stock cash (to record purchase of treasury stock) =(45000-4500) *1.5 43472 dividends dividends payable (to record dividends declared) 43524 dividends payable cash (to record dividends paid) =1800*30 43655 cash treasury stock paid in capital-treasury stock (to record sale of treasury stock) =1800*25 =E17-F18

fx 1 A B C D E date journal account titles and explanation debit credit 43704 cash paid in capital-treasury stock retained earnings treasury stock (to record sale of treasury stock) =2250*20 =F19 =F25-E22-E23 =2250*25 =(45000-4500+1800+2250)*2 43717 dividends dividends payable (to record dividends declared) =E28 =E28 43760 dividends payable cash (to record dividends paid) 67000 43830 income summary retained earnings (to close income summary account)

In case you have any query, kindly ask in comments.