Question

On January 1, 2020, Agassi Corporation had the following stockholders’ equity accounts. Common Stock ($10 par value, 50,000 shares issued and outstanding) $500,000 Paid-in Capital in Excess of Par—Common Stock 493,000 Retained Earnings 616,000 During 2020, the following transactions occurred. Jan. 15 Declared and paid a $1.05 cash dividend per share to stockholders. Apr. 15 Declared and paid a 10% stock dividend. The market price of the stock was $13 per share. May 15 Reacquired 1,800 common shares at a market price of $16 per share. Nov. 15 Reissued 900 shares held in treasury at a price of $18 per share. Dec. 31 Determined that net income for the year was $366,000.

Journalize the above transactions. (Include entries to close net income to Retained Earnings.) (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Date Account Titles and Explanation Debit Credit

Determine the ending balances for Paid-in Capital, Retained Earnings, and Stockholders’ Equity. Ending balances Paid-in Capital $ Retained Earnings $ Stockholders’ Equity $

Calculate the payout ratio and the return on common stockholders’ equity. (Round answers to 2 decimal places, e.g. 52.75%.) Payout ratio % Return on common stock equity ratio %

Answer 1

Agassi Corporation Debit Credit Calculation Date Account =50,000*1.05 15-Jan Cash Dividends 52,500 Cash 52,500 15-Apr Stock Dividends =50,000*10%*13 65,000 Common Stock 50,000 =50,000*10%*10 Paid-in Capital in Excess of Par -Common Stock 15,000 28,800 =1,800*16 15-May Treasury Stock Cash 28,800 =900*18 15-Nov Cash 16,200 Treasury Stock 14,400 =900*16 Paid-in Capital from sale of Treasury Stock 1,800 31-Dec Income Summary 366,000 Retained Earnings 366,000 31-Dec Retained Earnings 117,500 Cash Dividends 52,500 Stock Dividends 65,000 Req 2 Paid in Capital 1,059,800 Retained Earnings 864,500 Stockholders Equity 1,909,900

Req 3 Ratios Dividends paid / Net Income =(52,500+65,000)/366,000 Payout Ratio Payout Ratio 32.10% Return on common stockholders equity Net Income / Average Common Equity =366,000/ ((1,909,900+1,609,000)/2) Return on common stockholders equity 20.80%

Agassi Corporation TAccounts Date Date Date Paid-in Capital from sale of Treasury Stock Date Debit Debit Debit Credit Credit Credit Debit Credit Date Date Date Date Common Stock Paid-in Capital in Excess of Par -Common Stock Treasury Stock 1-Jan $ 500,000 1-Jan $ 493,000 15-Nov $ 15-Nov $14,400 15-May $ 28,800 1,800 15-Apr $ 15-Apr $ 50,000 15,000 $ 550,000 508,000 $ 14,400 Bal. Bal. Bal. 1,800 Bal. Retained Earnings Cash Dividends Stock Dividends 15-Jan $ 52,500 31-Dec $ 1-Jan $ 616,000 65,000 31-Dec $ 52,500 15-Apr $ 65,000 31-Dec $ 366,000 31-Dec $ 31-Dec $ 52,500 65,000 $ 864,500 Bal. 2$ Bal. Bal.

Agassi Corporation Partial Balance Sheet As of Dec 31, 2020 1-Jan-20 31-Dec-20 Stockholders Equity Paid in Capital Common Stock ($10 par value, 55,000 shares issued and 54,100 shares outstanding) 550,000 500,000 Paid-in Capital in Excess of Par -Common Stock 508,000 493,000 Paid-in Capital from sale of Treasury Stock 1,800 Total Paid in Capital 1,059,800 993,000 Retained Earnings 864,500 616,000 Treasury Stock (900 shares @ $16 per share) Total Stockholders Equity (14,400) 1,909,900 1,609,000 Workings Opening Common Shares 50,000 10% Stock Dividends 5,000 Number of Common Shares Issued 55,000 Treasury stock purchased Treasury stock reissued Number of Common Shares 0/s (1,800) 900 54,100