Question

Complete Problems 13-2B, 13-3B and 13-4B on the proper tab. You can complete the problems in Excel and submit the Excel spreadsheet in Canvas or you can print out the Excel spreadsheet and complete by hand. You will then need to scan in your completed worksheets and submit those in Canvas. Each problem is worth 8 points. Problem 13-2B This problem focuses on journal entries for dividends and Treasury Stock. It also includes preparation of a statement of Retained Earnings Some reminders: Remember that whatever per share amount is paid for and debited to the Treasury Stock account will be the per share amount that the Treasury Stock account is credited for. (Whatever it the Treasury Stock went in at it will be out at) If Treasury Stock is reissued for more than what was paid for it, a gain is not recognized. Instead this additional amount will be a credit to Paid In Capital - Treasury Stock. If less is received, it is a debit to Paid In Capital - Treasury Stock, up to the amount of a prior credit to the Paid in Capital Account with the remainder of the difference being a debit to Retained Earnings. When calculating the amount of the dividend declared on March 2nd, remember that dividends are only paid on outstanding shares. Outstanding shares are issued shares minus Treasury Shares. To determine the amount of the dividend, you would start with the 200,000 shares issued and outstanding at December 31, 2018 and subtract the Treasury Shares purchased on Jan 10. You would need to do the same analysis with the December 1st dividend. Make sure to check your ending retained earnings with the check figure provided in the book. For the Statement of Retained Earnings see page 479, Exhibit 13.9. For the Statement of Stockholder's Equity see the example in Canvas. Problem 13-3B This problem focuses on describing journal entries. Some reminders: When describing the journal entries, make sure to give complete descriptions. For example, for dividends, give the dividends per share and the number of shares. For the dividend for the stock dividend, make sure to provide the number of shares issues, the percentage of stock dividend, and the fair market value of the stock. For the March 25 notation, provide would would cause this type of note. What would cause the parvalue to go from $10 to $5. For the table, you want to enter the amount for each account after the journal entry would be posted to that account. Problem 13-4B This problems focuses on analyzing changes in stockholder's equity accounts. Some reminders: Cash dividends are only paid on outstanding shares. Dividends are not paid on Treasury shares. For questions 3-5, see my hints for each question.

Answer 1

13-2B
(a)

Date	Account Titles	Debit	Credit
Jan-10	Treasury Stock	$       480,000
	Cash		$          480,000
	(Purchase of own shares at $12 per share)
Mar-02	Retained Earnings	$       240,000
	Dividend Payable		$          240,000
	(Dividend declared on 160000 shares i.e. 200000-40000)
Mar-31	Dividend Payable	$       240,000
	Cash		$          240,000
	(Dividend paid in cash)
Nov-11	Cash	$       312,000
	Treasury Stock		$          288,000
	Paid in capital from Treasury Stock		$            24,000
	(Treasury stock reissued)
Nov-25	Cash	$       152,000
	Paid in capital from Treasury Stock	$         24,000
	Retained Earnings	$         16,000
	Treasury Stock		$          192,000
	(Treasury stock reissued)
Dec-01	Retained Earnings	$       500,000
	Dividend Payable		$          500,000
	(Dividend declared on 200000 shares)
Dec-31	Income Summary	$   1,072,000
	Retained Earnings		$      1,072,000
	(To close income summary account)

(b)

Statement of Retained Earnings
Beginning Balance	$   2,160,000
Add : Net Income	$   1,072,000
Less : Dividend	$       740,000
Less : Treasury stock	$         16,000
Ending Balance	$   2,476,000

(c)

Stockholders Equity
Common Stock	$       200,000
Paid in capital in excess of Par	$   1,400,000
Retained Earnings	$   2,476,000
Total Stockholders Equity	$   4,076,000

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