Question

Alexander Corporation reports the following components of stockholders' equity at December 31, 2018. Common stock-$25 par value, 70,000 shares authorized, 43,000 shares issued and outstanding Paid-in capital in excess of par value, common stock Retained earnings Total stockholders' equity $1,075,000 86,000 385,000 $1,546,000 During the year, the following transactions affected its stockholders' equity accounts. Jan. 2 Purchased 4,300 shares of its own stock at $25 cash per share. Jan. 7 Directors declared a $1.50 per share cash dividend payable on February 28 to the February 9 stockholders of record. Feb. 28 Paid the dividend declared on January 7. July 9 Sold 1,720 of its treasury shares at $30 cash per share. Aug. 27 Sold 2,150 of its treasury shares at $20 cash per share. Sept. 9 Directors declared a $2 per share cash dividend payable on October 22 to the September 23 stockholders of record. Oct. 22 Paid the dividend declared on September 9. Dec. 31 closed the $65,000 credit balance (from net income) in the Income Summary account to Retained Earnings. Required: 1. Prepare journal entries to record each of these transactions. 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

1
Date	General Journal	Debit	Credit
2-Jan	Treasury stock, common	107,500		=4300*25
	Cash		107,500
7-Jan	Retained earnings	58,050		=(43000-4300)*1.5
	Common dividend payable		58,050
28-Feb	Common dividend payable	58,050
	Cash		58,050
9-Jul	Cash	51,600		=1720*30
	Treasury stock, common		43,000	=1720*25
	Paid-in capital, treasury stock		8,600
27-Aug	Cash	43,000		=2150*20
	Paid-in capital, treasury stock	8,600
	Retained earnings	2,150
	Treasury stock, common		53,750	=2150*25
9-Sep	Retained earnings	85,140		=(43000-430)*2
	Common dividend payable		85,140
22-Oct	Common dividend payable	85,140
	Cash		85,140
31-Dec	Income summary	65,000
	Retained earnings		65,000
2
	ALEXANDER CORPORATION
	Statement of Retained Earnings
	For Year Ended December 31, 2019
	Retained earnings, December 31, 2018	385,000
	Add: Net income	65,000
		450,000
	Less: Cash dividends declared	(143,190)
	Less: Treasury stock reissuances	(2,150)
	Retained earnings, December 31, 2019	304660
3
	ALEXANDER CORPORATION
	Stockholders’ Equity Section of the Balance Sheet
	December 31, 2019
	Common stock - $25 par value	1,075,000
	Paid-in capital in excess of par value, common stock	86,000
	Retained earnings	304,660
	Less cost of treasury stock	(10,750)
	Total stockholders’ equity	1,454,910