Question

Problem 8-23 Recording and reporting stock transactions and cash dividends across two accounting cycles LO 8-3, 8-4, 8-5, 8-6 Sun Corporation received a charter that authorized the issuance of 100,000 shares of $ 10 par common stock and 50,000 shares of $50 par, 5 percent cumulative preferred stock. Sun Corporation completed the following transactions during its first two years of operation: Jan.5 12 Apr. 5 2018 Sold 6,000 shares of the $10 par common stock for $15 per share. Sold 1,000 shares of the 5 percent preferred stock for $55 per share Sold 30,000 shares of the $10 par common stock for $21 per share. During the year, earned $150,000 in cash revenue and paid $88,000 for cash operating expenses. Declared the cash dividend on the outstanding shares of preferred stock for 2018. The dividend will be paid on February 15 to stockholders of record on January 10, 2019. Dec. 31 31 Feb. 15 Mar. 3 May 5 Dec. 31 2019 Paid the cash dividend declared on December 31, 2018. Sold 15,000 shares of the $50 par preferred stock for $53 per share. Purchased 900 shares of the common stock as treasury stock at $24 per share. During the year, earned $2 10,000 in cash revenues and paid $98,000 for cash operating expenses. Declared the annual dividend on the preferred stock and a $0.50 per share dividend on the common stock. Required a. Organize the transaction data in accounts under an accounting equation. b. Prepare the stockholders' equity section of the balance sheet at December 31, 2018. c. Prepare the balance sheet at December 31, 2019.

Answer 1

Ans a Assets Assets = Liabilities + = Liabilities + Retained Earnigs Stockholders Equity Contributed Capital Paid In Capital in Paid In Capital in excess of Par - + excess of Par- Common Stock Preferred Stock Date Cash Dividend Payable Common 1 Stock Preferred Stock Treasury Stock + Revenue - Expense - Dividend + + + + $60,000 + + $30,000 + + $50,000 + + $5,000 + + $90,000 $55,000 $630,000 $62,000 $300,000 + + + $330,000 + + $150,000 -1 + + $88,000 + + + + + + + + $2,500 $2,500 + $360,000 $2,500 $2,500 $837,000 + $50,000 $360,000 + $5,000 $0 + $150,000- $88,000 2018 Jan 5 Jan 12 Apr 5 Dec 31 Dec 31 Bal 2019 Feb 15 Mar 3 May 5 Dec 31 Dec 31 Bal + + + + + + + $750,000 + $45,000 + + + + + + + + $21,600 + ($2,500) ($2,500) $795,000 ($21,600) $112,000 $57,550 $1,719,900 = $57,550 + $360,000 + +$210,000 - + $98,000 + + + + + $57,550 $60,050 $800,000+ $360,000+ $50,000 $21,600 + $360,000 - $186,000 -

Ansb Sun Corporation Balance Sheet (Partial) Dec 31, 2018 Stockholders' Equity Common Stock Preferred Stock Paid In Capital in excess of Par - Common Stock Paid In Capital in excess of Par - Preferred Stock Total Paid in Capital Retained Earnings Total Stockholders' Equity $360,000 $50,000 $360,000 $5,000 $775,000 $59,500 $834,500

Ansc Sun Corporation Balance Sheet (Partial) Dec 31, 2019 Assets Cash Total Assets $1,719,900 $1,719,900 Liabilities Dividend Payable $57,550 Stockholders' Equity Common Stock Preferred Stock Paid In Capital in excess of Par - Common Stock Paid In Capital in excess of Par - Preferred Stock Total Paid in Capital Retained Earnings Less: Treasury Stock Total Stockholders' Equity $360,000 $800,000 $360,000 $50,000 $1,570,000 $113,950 ($21,600) $1,662,350 Total Liability and Stockholders' Equity $1,719,900