Question

Exercise 11-21 Cash dividends, treasury stock, and statement of retained earnings LO C3, P2, P3 Alexander Corporation reports the following components of stockholders' equity at December 31, 2018. Common stock-$25 par value, 60,000 shares authorized, 37,000 shares issued and outstanding Paid-in capital in excess of par value, common stock Retained earnings Total stockholders' equity $ 925,000 74,000 364,000 $1,363,000 During the year, the following transactions affected its stockholders' equity accounts. Jan. Jan. Feb. July Aug Sept. 2 Purchased 3,700 shares of its own stock at $25 cash per share. 7 Directors declared a $1.50 per share cash dividend payable on February 28 to the February 9 stockholders of record. 28 Paid the dividend declared on January 7. 9 Sold 1,480 of its treasury shares at $30 cash per share. 27 Sold 1,850 of its treasury shares at $20 cash per share. 9 Directors declared a $2 per share cash dividend payable on October 22 to the September 23 stockholders of record. 22 Paid the dividend declared on September 9. 31 closed the $59,000 credit balance (from net income) in the Income Summary account to Retained Earnings. Oct. Dec. Required: 1. Prepare journal entries to record each of these transactions. 2. Prepare a statement of retained earnings for the year ended December 31, 2019. 3. Prepare the stockholders' equity section of the company's balance sheet as of December 31, 2019.

Answer 1

Required 1: Journal entries

Date	General Journal	Debit	Credit
Jan 2	Treasury stock (3,700 * $25)	$92,500
	Cash		$92,500
Jan 7	Retained earnings	$49,950
	Dividend payable (37,000 - 3,700)*$1.5		$49,950
Feb 28	Dividend payable	$49,950
	Cash		$49,950
July 9	Cash (1,480 * $30)	$44,400
	Paid-in capital in excess of par - Treasury stock		$7,400
	Treasury stock (1,480 * $25)		$37,000
Aug 27	Cash (1,850 * $20)	$37,000
	Paid-in capital in excess of par - Treasury stock	$7,400
	Retained earning	$1,850
	Treasury stock (1,850 * $25)		$46,250
Sept 9	Retained earnings	$73,260
	Dividend payable (37,000-3,700+1,480+1,850)*$2		$73,260
Oct 22	Dividend payable	$73,260
	Cash		$73,260
Dec 31	Income summary	$59,000
	Retained earnings		$59,000

Required 2: Retained earning statement

Retained earning as on Dec 31, 2018	$364,000
(+) Net income	$59,000
	$423,000
(-) Cash dividend declared (73,260 + 49,950)	($123,210)
(-) Treasury stock re-issuance	($1,850)
Retained earning as on Dec 31, 2019	$297,940

Required 3: Stockholder's equity section

Common stock $25 par value	$925,000
Paid-in capital in excess of par - Common stock	$74,000
Retained earnings	$297,940
(-) Treasury stock (3,700-1,480-1,850) * $25	($9,250)
Total stockholder's equity	$1,287,690