Morrow Enterprises Inc. manufactures bathroom fixtures. The stockholders' equity accountsof Morrow Enterprises Inc., with balances on January 1, 20Y5, are as follows:Common Stock, $20 stated value (500,000 shares authorized,375,000 shares issued)....$ 7,500,000Paid-In Capital in Excess of Stated Value-Common Stock..Retained Earnings .....825,00033,600,000Treasury Stock (25,000 shares, at a cost of $18 per share)450,000The following selected transactions occurred during the year:Jan. 22. Paid cash dividends of $0.08 per share on the common stock. The dividendhad been properly recorded when declared on December 1 of the precedingfiscal year for $28,000.Apr. 10. Issued 75,000 shares of common stock for $24 per share.June 6. Sold all of the treasury stock for $26 per share.5. Declared a 4% stock dividend on common stock, to be capitalized at the mar-ket price of the stock, which is $25 per share.July Aug. 15. Issued the certificates for the dividend declared on July 5.Nov. 23. Purchased 30,000 shares of treasury stock for $19 per share.Dec. 28. Declared a $0.10-per-share dividend on common stock.31. Closed the two dividends accounts to Retained Earnings.Instructions1. Enter the January 1 balances in T accounts for the stockholders' equity accounts listed.Also prepare T accounts for the following: Paid-In Capital from Sale of Treasury Stock;Stock Dividends Distributable; Stock Dividends; Cash Dividends.2. Journalize the entries to record the transactions and post to the eight selected accounts.3. Prepare a retained earnings statement for the year ended December 31, 20Y5.4. Prepare the Stockholders' Equity section of the December 31, 20Y5, balance sheet us-ing Method 1 of Exhibit 8.

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Asked Dec 19, 2019
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Morrow Enterprises Inc. manufactures bathroom fixtures. The stockholders' equity accounts
of Morrow Enterprises Inc., with balances on January 1, 20Y5, are as follows:
Common Stock, $20 stated value (500,000 shares authorized,
375,000 shares issued)....
$ 7,500,000
Paid-In Capital in Excess of Stated Value-Common Stock..
Retained Earnings .....
825,000
33,600,000
Treasury Stock (25,000 shares, at a cost of $18 per share)
450,000
The following selected transactions occurred during the year:
Jan. 22. Paid cash dividends of $0.08 per share on the common stock. The dividend
had been properly recorded when declared on December 1 of the preceding
fiscal year for $28,000.
Apr. 10. Issued 75,000 shares of common stock for $24 per share.
June 6. Sold all of the treasury stock for $26 per share.
5. Declared a 4% stock dividend on common stock, to be capitalized at the mar-
ket price of the stock, which is $25 per share.
July
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Morrow Enterprises Inc. manufactures bathroom fixtures. The stockholders' equity accounts of Morrow Enterprises Inc., with balances on January 1, 20Y5, are as follows: Common Stock, $20 stated value (500,000 shares authorized, 375,000 shares issued).... $ 7,500,000 Paid-In Capital in Excess of Stated Value-Common Stock.. Retained Earnings ..... 825,000 33,600,000 Treasury Stock (25,000 shares, at a cost of $18 per share) 450,000 The following selected transactions occurred during the year: Jan. 22. Paid cash dividends of $0.08 per share on the common stock. The dividend had been properly recorded when declared on December 1 of the preceding fiscal year for $28,000. Apr. 10. Issued 75,000 shares of common stock for $24 per share. June 6. Sold all of the treasury stock for $26 per share. 5. Declared a 4% stock dividend on common stock, to be capitalized at the mar- ket price of the stock, which is $25 per share. July

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Aug. 15. Issued the certificates for the dividend declared on July 5.
Nov. 23. Purchased 30,000 shares of treasury stock for $19 per share.
Dec. 28. Declared a $0.10-per-share dividend on common stock.
31. Closed the two dividends accounts to Retained Earnings.
Instructions
1. Enter the January 1 balances in T accounts for the stockholders' equity accounts listed.
Also prepare T accounts for the following: Paid-In Capital from Sale of Treasury Stock;
Stock Dividends Distributable; Stock Dividends; Cash Dividends.
2. Journalize the entries to record the transactions and post to the eight selected accounts.
3. Prepare a retained earnings statement for the year ended December 31, 20Y5.
4. Prepare the Stockholders' Equity section of the December 31, 20Y5, balance sheet us-
ing Method 1 of Exhibit 8.
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Aug. 15. Issued the certificates for the dividend declared on July 5. Nov. 23. Purchased 30,000 shares of treasury stock for $19 per share. Dec. 28. Declared a $0.10-per-share dividend on common stock. 31. Closed the two dividends accounts to Retained Earnings. Instructions 1. Enter the January 1 balances in T accounts for the stockholders' equity accounts listed. Also prepare T accounts for the following: Paid-In Capital from Sale of Treasury Stock; Stock Dividends Distributable; Stock Dividends; Cash Dividends. 2. Journalize the entries to record the transactions and post to the eight selected accounts. 3. Prepare a retained earnings statement for the year ended December 31, 20Y5. 4. Prepare the Stockholders' Equity section of the December 31, 20Y5, balance sheet us- ing Method 1 of Exhibit 8.

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Expert Answer

Step 1

Common stock: These are the ordinary shares that a corporation issues to the investors in order to raise funds. In return, the investors receive a share of profit from the profits earned by the corporation in the form of dividend.

Treasury Stock: It refers to the shares that are reacquired by the corporation that are already issued to the stockholders, but reacquisition does not signify retirement.

Par value: It refers to the value of a stock that is stated by the corporation’s charter. It is also known as face value of a stock.

Stated value: It refers to an amount per share, which is assigned by the board of directors to no par value stock.

 Issue of common stock for non-cash assets or services: Corporations often issue common stock for the services received from attorneys or consultants as compensation, or for the purchase of non-cash assets such as land, buildings, or equipment.

Retained earnings statement: This is a financial statement that shows the amount of the net income retained by a company at a particular point of time for reinvestment and pays its debts and obligations. It shows the amount of retained earnings that is not paid as dividends to the shareholders.

 

Stockholders’ equity: It refers to the amount of capital that includes the amount of investment by the stockholders, earnings generated from the normal business operations, and less any dividends paid to the stockholders.

Step 2
  1. Record the transactions for Incorporation ME.
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Account Titles and Explanation Credit (S) Date Debit (S) 20Υ Cash Dividends Payable January 22 28,000 28,000 Cash (To record the payment of cash dividends) 10 Cash (75,000 sharesx $24) April 1,800,000 Common Stock (75,000 shares x $20) 1,500,000 Paid-in Capital in Excess of stated value Common Stock (S1,800,000-$1,500,000) (To record issuance of 75,000 shares in excess of stated value) 300,000 6 Cash (25,000 shares x $26 per share) Treasury stock (25,000 shares x$18 per share (1)) Paid-in capital from treasury stock ($650,000- $450,000) (To record sale of treaswry stock for above the cost price of S18 per share) June 650,000 450,000 200,000 5 Stock Dividends July (4) Common Stock Dividends Distributable (5) 450,000 360,000 Paid-in Capital in excess of Stated Value-Common stock (To record the declaration of stock dividends) (6) 90,000

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Step 3
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Common Stock Dividends Distributable (5) August 15 360,000 Common Stock 360,000 (To record the distribution of stock dividends) Treasury stock (30,000 shares x$19 per share) November 23 570,000 Cash 570,000 (To record the purchase of 30,000 shares of treasury stock) December 28 Cash Dividends 43,800 Cash Dividends Payable (To record the declaration of cash dividends) 43,800 December 31 Retained Earnings 493,800 (4) (8) (To record the closing of stock dividends and cash dividends to retained earnings Stock dividends 450,000 Cash Dividends 43,800 account)

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