Problem 1 - Cash dividends, treasury stock, and statement of retained earnings - Widget Corporation operates in Tampa, Florida and reports the following stockholders’ equity at December 31, 2019. Common stock—$25 par value, 70,000 shares authorized, 42,000 shares issued and outstanding $ 1,050,000 Paid-in capital in excess of par value, common stock 84,000 Retained earnings 382,000 Total stockholders’ equity $ 1,516,000 During 2020, the following transactions affected its stockholders’ equity accounts. 1/2 Purchased 4,200 shares of its own stock at $25 cash per share. 1/7 Directors declared a $1.50 per share cash dividend payable on February 28 to the February 9 stockholders of record. 2/28 Paid the dividend declared on January 7. 7/9 Sold 1,680 of its treasury shares at $30 cash per share. 8/27 Sold 2,100 of its treasury shares at $20 cash per share. 9/9 Directors declared a $2 per share cash dividend payable on October 22 to the September 23 stockholders of record. 10/22 Paid the dividend declared on September 9. 12/31 Closed the $64,000 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, 2020. 3. Prepare the stockholders’ equity section of the company’s balance sheet as of December 31, 2020.
Problem 1 - Cash dividends,
Widget Corporation operates in Tampa, Florida and reports the following
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Common stock—$25 par value, 70,000 shares authorized, |
$ |
1,050,000 |
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Paid-in capital in excess of par value, common stock |
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84,000 |
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Retained earnings |
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382,000 |
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Total stockholders’ equity |
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1,516,000 |
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During 2020, the following transactions affected its stockholders’ equity accounts.
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1/2 |
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Purchased 4,200 shares of its own stock at $25 cash per share.
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1/7 |
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Directors declared a $1.50 per share cash dividend payable on February 28 to the February 9 stockholders of record.
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2/28 |
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Paid the dividend declared on January 7.
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7/9 |
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Sold 1,680 of its treasury shares at $30 cash per share.
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8/27 |
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Sold 2,100 of its treasury shares at $20 cash per share.
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9/9 |
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Directors declared a $2 per share cash dividend payable on October 22 to the September 23 stockholders of record.
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10/22 |
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Paid the dividend declared on September 9.
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12/31 |
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Closed the $64,000 credit balance (from net income) in the Income Summary account to Retained Earnings. |
Required:
1. Prepare
2. Prepare a statement of retained earnings for the year ended December 31, 2020.
3. Prepare the stockholders’ equity section of the company’s balance sheet as of December 31, 2020.
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