Question

The following was taken from Stockholders’ Equity section of Lynbrook’s December 31, 2018 balance sheet: Common stock- $10 par value, 200,000 shares authorized 50,000 shares issued and outstanding 500,000 Additional Paid-in Capital 80,000 Retained earnings 350,000 Total stockholders' equity 930,000 In year 2019, the following transactions affected its stockholders' equity accounts.

Jan. 1 Purchased 4,000 shares of its own stock at $20 cash per share.

Jan. 5 Directors declared a $2 per share cash dividend payable on Feb. 28 to the Feb. 5 stockholders of record.

Feb. 28 Paid the dividend declared on January 5.

July 6 Sold 1,500 of its treasury shares at $24 cash per share.

Aug. 22 Sold 2,500 of its treasury shares at $17 cash per share.

Sept. 5 Directors declared a $2 per share cash dividend payable on October 28 to the September 25 stockholders of record.

Oct. 28 Paid the dividend declared on September 5.

Dec. 31 Closed the $500,000 credit balance (from net income) in the Income Summary account to Retained Earnings.

Required 1. Prepare journal entries to record each of these transactions for 2019. 2. Prepare the stockholders' equity section of the company's balance sheet as of December 31, 2019. (include a supporting schedule for your balance in retained earnings)

Answer 1

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Part 1
Date	Account	Debit	Credit
Jan 1	Treasury Stock (4,000*$20)	$      80,000
	Cash		$         80,000
	(To record purchase of commons tock)
Jan 5	Retained Earning	$      92,000
	Dividend Payable		$         92,000
	(To record dividend declared) (50,000-4,000)*$2
Feb 28	Dividend Payable	$      92,000
	Cash		$         92,000
	(To record payment of dividend)
Jul 6	Cash (1,500*$24)	$      36,000
	Treasury Stock (1,500*$20)		$         30,000
	Additional Paid in capital-Treasury		$            6,000
	(To record sale of treasury shares)
Aug 22	Cash (2,500*$17)	$      42,500
	Additional Paid in capital-Treasury	$        7,500
	Treasury Stock (2,500*$20)		$         50,000
	(To record sale of treasury shares)
Sep 5	Retained Earning	$   100,000
	Dividend Payable		$       100,000
	(To record dividend declared) (50,000*$2)
Oct 28	Dividend Payable	$   100,000
	Cash		$       100,000
	(To record payment of dividend)
Dec 31	Income Summary	$   500,000
	Retained Earning		$       500,000
	(To close income summary)
	Part 2
	Common Stock		$       500,000
	Additional paid in capital		$         80,000
	Additional paid in capital-Treasury		$         (1,500)
	Total Paid in capital		$       578,500
	Retained Earning		$       658,000
	$350,000+$500,000-$92,000-$100,000
	Total Stockholder's Equity		$   1,236,500

Answer 2

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