Question

eBook Calculator Entries for Selected Corporate Transactions Morrow Enterprises Inc, manufactures bathroom fixtures. The stockholders' equity accounts of Morrow Enterprises Inc., with balances on January 1, 2045, are as follows: $2,800,000 Common Stock, $10 stated value (400,000 shares authorized, 280,000 shares issued) Paid In Capital in Excess of Stated Value Common Stock 550,000 6,360,000 Retained Earnings 420,000 Treasury Stock (28,000 shares, at cost) 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 $35,280. Apr. 10. Issued 55,000 shares of common stock for $990,000. June 6. Sold all of the treasury stock for $504,000. July S. 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 18,000 shares of treasury stock for $360,000. Dec. 28. Declared a $0.17-per-share dividend on common stock. 31. Closed the credit balance of the income summary account, $6,614,000. 31. Closed the two dividends accounts to Retained Earnings. Previous Next Check My Work 4:00 9/25 o CE

Answer 1

Requirement 1.) T- Accounts

COMMON STOCK
		Jan.1 Opening bal.	2,800,000
		April 10	550,000
		Aug.15	167,500
		Dec . 31 Bal.	3,517,500

PAID IN CAPITAL IN EXCESS OF STATED VALUE- COMMON STOCK
		Jan.1 Opening bal.	550,000
		April 10	440,000
		July 5	167,500
		Dec . 31 Bal.	1,157,500

RETAINED EARNINGS
Dec.31	381,375	Jan.1 Opening bal.	6,360,000
		Dec.31	6,614,000
		Dec . 31 Bal.	12,592,625

TREASURY STOCK
Jan.1	420,000	June 6	420,000
Nov.23	360,000
Dec.31 bal.	360,000

PAID IN CAPITAL FROM SALE OF TREASURY STOCK
		June 6	84,000

STOCK DIVIDENDS DISTRIBUTABLE
Aug.15	167,500	July 5	167,500

STOCK DIVIDENDS
July 5	335,000	Dec.31	335,000

CASH DIVIDENDS
Dec.28	46,375	Dec.31	46,375

Requirement 2.) Journal Entries

Date	Account Title and Explanation	Debit $	Credit $
Jan.22	Cash Dividend payable	35,280
	Cash		35,280
	(To record cash dividend paid)
April 10	Cash	990,000
	Common Stock (55,000*$10)		550,000
	Paid in Capital in excess of stated value- common stock		440,000
	(To record issue of commo stock)
June 6	Cash	504,000
	Treasury stock		420,000
	Paid in capital from sale of treasury stock		84,000
	(To record salr of treasury stock)
July 5	Stock dividend	335,000
	Stock dividends distributable		167,500
	Paid in capital inexcess of stated value- common stock		167,500
	(To record stock dividend declared)
Aug.15	Stock dividends distributable	167,500
	Common stock		167,500
	(To record dividend issued)
Nov.23	Treasury stock	360,000
	Cash		360,000
	(To record treasury stock purchased)
Dec.28	Cash dividend	46,375
	Cas dividends payable		46,375
	(To record cash dividend declared)
Dec.31	Income summary	6,614,000
	Retained earnings		6,614,000
	(To record income summary account)
Dec.31	Retained earnings	381,375
	Stock dividends		335,000
	Cash dividends		46,375
	(To close dividend account)

Working Notes:-

1.)

Calculation of Dividend payable on Jan.22
Total share outstanding as on 01/01/20Y5	280,000
Less: Treasury Stock on 01/01/20Y5	(28,000)
Total Share Outstanding	252,000
Cash Dividend per share	$ 0.14
Cash Dividend (252,000*0.14)	35,280

2.) Calculation of Stock Dividend issued on July 5

Total share outstanding on 01/01/20Y5	280,000
Add: Stock issued on April 10	55,000
Total share outstanding on 07/01/20Y5	335,000
Stock dividend	5%
Stock dividend shares issued (5%*335,000)	16,750
Market price per share	$ 20
Stock dividend issued (16,750*20)	335,000
Common Stock (16,750*10)	167,500
PAID IN CAPITAL IN EXCESS OF STATED VALUE- COMMON STOCK	167,500
Note: treasury stock was considered because it was sold on June 6

3.) Calculation of Stock Dividends on Dec. 28

Total share outstanding on 01/01/20Y5	280,000
Add: stock issued on April 10	55,000
Add: stock dividend on Aug.15	14,250
Total common stock issued	349,250
Less: treasury stock purchased on Nov.23	(18,000)
Total share outstanding on 12/28/20Y5	331,250
Cash dividend per share	$ 0.14
Cash dividend value (331,250*0.14)	46,375

Requirement 3.)

MORROW ENTERPRISES INC. Statement of Retained Earnings For the year ended Dec.31 20Y5
Retained earnings Jan.1 20Y5		6,360,000
Net Income	6,614,000
Less: Cash Dividend	(46,375)
Less: Stock dividend	(335,000)
Increase in Retained Earnings		6,232,625
Retained earnings Dec.31 20Y5		12,592,625

Requirement 4: Shareholder's Equity section in Balance Sheet

Shareholder's Equity
Paid in capital
Common stock, $10 stated value (400,000 shares authorized 351,750 shares issued )	3,517,500
Paid in capital in excess of stated value- common stock	1,157,500
Paid in capital from treasury stock	84,000
Total paid in capital		4,759,000
Reatined earnings		12,592,625
Total		17,351,625
Less: Treasury stock 18000 shares		(360,000)
Total Shareholder's Equity		16,991,625

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