Question

Entries for Selected Corporate Transactions

Morrow Enterprises Inc. manufactures bathroom fixtures. The stockholders' equity accounts of Morrow Enterprises Inc., with balances on January 1, 20Y5, are as follows:

Common Stock, $10 stated value (500,000 shares authorized, 320,000 shares issued)	$3,200,000
Paid-In Capital in Excess of Stated Value-Common Stock	600,000
Retained Earnings	7,260,000
Treasury Stock (32,000 shares, at cost)	480,000

The following selected transactions occurred during the year:

Jan. 22.	Paid cash dividends of $0.14 per share on the common stock. The dividend had been properly recorded when declared on December 1 of the preceding fiscal year for $40,320.
Apr. 10.	Issued 60,000 shares of common stock for $1,080,000.
June 6.	Sold all of the treasury stock for $576,000.
July 5.	Declared a 5% stock dividend on common stock, to be capitalized at the market price of the stock, which is $20 per share.
Aug. 15.	Issued the certificates for the dividend declared on July 5.
Nov. 23.	Purchased 20,000 shares of treasury stock for $400,000.
Dec. 28.	Declared a $0.17-per-share dividend on common stock.
31.	Closed the credit balance of the income summary account, $7,550,000.
31.	Closed the two dividends accounts to Retained Earnings.

Required:

1. The January 1 balances have been entered in T accounts for the stockholders' equity accounts. Record the above transactions in the T accounts and provide the December 31 balance where appropriate.

eBook Calculator Common Stock Jan. 1 Bal. Apr. 107 3,200,000 600,000 190,000 3,990,000 Aug. 15 Dec. 31 Bal. Paid-In Capital in Excess of Stated Value-Common Stock Jan. 1 Bal. Apr. 10 600,000 108,000 July 5 100,000 Dec. 31 Bal. 7,550,000 x Retained Earnings Dec. 31 7,550,000 x Jan. 1 Bal. Dec. 31 Dec. 31 Bal. 7,260,000 7,550,000 14,810,000 x

Answer 1

Credit Calculation Morrow Enterprises Date Account 22-Jan Dividends Payable Cash Debit 40,320 40,320 1,080,000 10-Apr Cash Common Stock Paid in Capital in Excess of Stated Value-Common Stock =60,000*10 600,000 480,000 576,000 6-Jun Cash Treasury Stock Paid in Capital from Treasury Stock 480,000 96,000 380,000 5-Jul Stock Dividends Stock Dividends Distributable Paid in Capital in Excess of Stated Value-Common Stock =19,000*20 =19,000*10 190,000 190,000 190,000 15-Aug Stock Dividends Distributable Common Stock 190,000 400,000 23-Nov Treasury Stock Cash 400,000 64,430 As per below wkgs 28-Dec Cash Dividends Dividends Payable 64,430 7,550,000 31-Dec Income Summary Retained Earnings 7,550,000 444,430 31-Dec Retained Earnings Stock Dividends Cash Dividends 380,000 64,430 320,000 60,000 380,000 Workings Cash Dividends Opening Shares Shares Issued Subtotal 5% Stock Dividends Number of Common Shares Issued Treasury Stock Number of Common Shares o/s Cash Dividend per share Cash Dividends 19,000 =380,000*5% 399,000 (20,000) 379,000 0.17 64,430 =379,000*0.17

Credit Date Credit Date Credit Morrow Enterprises T Accounts Date Debit Date Common Stock Op bal 10-Apr 15-Aug Date Debit Date Credit Paid in Capital in Excess of Stated Value-CS Op bal 600,000 10-Apr 480,000 5-Jul 190,000 Debit Date Retained Earnings 380,000 Op bal 64,430 31-Dec Debit Date Treasury Stock 480,000 6-Jun 400,000 3,200,000 600,000 190,000 480,000 31-Dec 31-Dec 7,260,000 7,550,000 Op bal 23-Nov 14,365,570 Bal. Bal. 3,990,000 Paid in Capital from Treasury Stock 6-Jun 96,000 Bal. 1,270,000 Stock Dividends Distributable 15-Aug 190,000 5-Jul 190,000 Bal. Stock Dividends 380,000 31-Dec 400,000 Cash Dividends 64,430 31-Dec 5-Jul 380,000 28-Dec 64,430 Bal. 96,000 Bal. Bal. Bal.

7,260,000 7,550,000 Morrow Enterprises Statement of Retained Earnings For the year ended December 31, 2015 Retained Earnings, Jan 1, 2015 Net income Dividends Cash Dividends Stock Dividends Changes in retained earnings Retained Earnings, Dec 31, 2045 (64,430) (380,000) 7,105,570 14,365,570

Morrow Enterprises Balance Sheet As of December 31, 2045 Stockholders Equity Paid in Capital Common Stock - $10 stated value (500,000 shares authorized, 399,000 shares issued & 379,000 shares outstanding) Paid in Capital in Excess of Stated Value-Common Stock Paid in Capital from Sale of Treasury Stock Total Paid in Capital Retained Earnings Total Less: Treasury Stock (20,000 shares @ cost $20 per share) Total Stockholders Equity 3,990,000 1,270,000 96,000 5,356,000 14,365,570 19,721,570 (400,000) 19,321,570