Question: How do I prepare a stock holder's equity?
Prefered stock (8%, $50 par, cummulative, 10,000 shares authorized) $400,000
Common stock ($1 stated value 2,000,000 shares authorized) $1,000,000
Paid in Captial in Excess of Par - Preferred stock $100,000
Paid in Capital in excess of stated value - common stock $1,450,000
Retained earnings $1,816,000
Treasury Stock (10,000 common shares) $50,000
During 2012 the corporation had the following transactions and events pertaining to its stock hoder's equity.
Feb 1 Isused 25,000 shares of common stock for $120,000
Apr 14 Sold 6,000 shares of treasury stock - common for $33,000
Sept 3 issued 5,000 shares of common stock for a patent valued at $35,000
Nov 10 Purchased 1,000 shares o common stock for the treasury at a cost of $6000
Dec 31 Determined that net income for the year was $452,000
*No Dividends were declared during the year*
Instructions are:
1. Journalize the transactions and the closing entry for net income
2. Enter the beginning balances in the accounts and post the journal entries to the stockholder's equity accounts (Use J5 for the posting reference)
3. prepare a stockholder's equity section at December 31, 2012, incl the disclosure of the preferred dividends in arrears.
Here is what I came up with...Am I heading in the right direction? I am taking Acct 2 and terrified and I am not catching this and starting to feel the pressures of dropping the course. HELP ME PLEASE!!
2012 Account Titles and Explanation Ref. Debit Credit Balance
Month Day
FEB 1 Cash 120,000
Common Stock 25,000
Paid in capital excess of Stated Value - common stock 95,000
Apr 14 Cash 33,000
Treasury Stock 6,000
Paid in Capital from Treasury Stock 27,000
Sept 3 Patent 35,000
Commom Stock 5,000
Paid in capital in excess of par value/patent 30,000
Nov 10 Treasury Stock 1,000
Paid in capital from treasury stock 5,000
Cash 6,000
Dec 31 Income 452,000
Retained Earnings 452,000
Total Stockholder's Equity 646,000
Answer:
Apr 14 Sold 6,000 shares of treasury stock - common for $33,000
Unless otherwise stated, all purchases and sales of treasury stock should be recorded at its cost. There were 10,000 shares of treasury stock at a cost of $50,000, that's $5 each. The entry should be:
Dr Cash 33,000
Cr Treasury Stock 30,000
Cr Paid in Capital from Treasury Stock 3,000
For the Sept. 3 entry, the credit should be to "Paid-In Capital in Excess of Stated Value". The same as the Feb. 1 entry.
Nov 10 Purchased 1,000 shares o common stock for the treasury at a cost of $6000
Same explanation as above.
Dr Treasury Stock 6,000
Cr Cash 6,000
Dec 31 Determined that net income for the year was $452,000
Revenues and expenses are closed to the "Income Summary" account. The Income Summary account is then closed to Retained Earnings.
Dr Income Summary 452,000
Cr Retained Earnings 452,000
Before the entries, total Stockholders' Equity was:
Prefered Stock (8%, $50 par, cummulative, 10,000 shares authorized) $400,000
Common stock ($1 stated value 2,000,000 shares authorized) $1,000,000
Paid in Captial in Excess of Par - Preferred stock $100,000
Paid in Capital in excess of stated value - common stock $1,450,000
Retained earnings $1,816,000
Treasury Stock (10,000 common shares) $50,000
Total Stockholders' Equity $4,716,000
*Treasury Stock is subtracted, all other amounts are added.
After the entries the amounts are:
Prefered Stock (8%, $50 par, cummulative, 10,000 shares authorized) $400,000
Common stock ($1 stated value 2,000,000 shares authorized) $1,060,000
Paid in Captial in Excess of Par - Preferred stock $100,000
Paid in Capital in excess of stated value - common stock $1,575,000
Paid-In capital from treasury stock 3,000
Retained earnings $2,268,000
Treasury Stock (10,000 common shares) $26,000
Total stockholders' equity $5,380,000