Stockholders’ Equity: Transactions and Balance Sheet PresentationThe stockholders’ equity of Summit Corporation at January 1 follows:7 Percent preferred stock, $100 par value, 20,000 shares authorized; 5,000 shares issued and outstanding$500,000Common stock, $15 par value, 100,000 shares authorized; 40,000 shares issued and outstanding600,000Paid-in capital in excess of par value-Preferred stock24,000Paid-in capital in excess of par value-Common stock360,000Retained earnings325,000Total Stockholders' Equity$1,809,000 The following transactions, among others, occurred during the year:Jan.12Announced a 3-for-1 common stock split, reducing the par value of the common stock to $5 per share. The authorization was increased to 300,000 shares.Mar.31Converted $41,000 face value of convertible bonds payable (the book value of the bonds was $43,000) to common stock. Each $1,000 bond converted to 125 shares of common stock.June1Acquired equipment with a fair market value of $65,000 in exchange for 500 shares of preferred stock.Sept.1Acquired 10,000 shares of common stock for cash at $11 per share.Oct.12Sold 1,500 treasury shares at $13 per share.Nov.21Issued 5,000 shares of common stock at $12 per share.Dec.28Sold 1,200 treasury shares at $10 per share. 31Closed net income of $84,000 to the Retained Earnings account. Required Prepare journal entries for the given transactions and post them to the T-accounts. Do not prepare the journal entry for the Dec. 31 transaction, but post the appropriate amount to the Retained Earnings T-account. Determine the ending balances for the stockholders’ equity accounts.Prepare the stockholders’ equity section of the balance sheet at December 31. Stockholder's equity sectionT-AccountsJournal entriesDo not use negative signs with your answers.Stockholders' EquityPaid in CapitalPreferred Stock550,000Common Stock650,625 v $ 1,200,625 vAdditional Paid-in-CapitalPaid-in-Capital in Excess of Par value -Preferred Stock39,000Paid-in-Capital in Excess of Par value - Common Stock412,375Paid-in-Capital from Treasury Stock1,800453,175Total Paid-in-Capital1,653,800Retained Earnings409,000325,000 xLess: Treasury Stock - Common80,300$ 1,982,500Total Stockholders' Equity

Prepare and record journal entries for the transactions as shown below: Working note:…

Answered: Stockholder's equity section T-Accounts…

Financial Accounting: The Impact on Decision Makers

10th Edition

ISBN:9781305654174

Author:Gary A. Porter, Curtis L. Norton

Publisher:Gary A. Porter, Curtis L. Norton

Chapter11: Stockholders' Equity

Section: Chapter Questions

Problem 11.1E

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Question

Stockholders’ Equity: Transactions and Balance Sheet Presentation

The stockholders’ equity of Summit Corporation at January 1 follows:

7 Percent preferred stock, $100 par value, 20,000 shares authorized;
5,000 shares issued and outstanding	$500,000
Common stock, $15 par value, 100,000 shares authorized;
40,000 shares issued and outstanding	600,000
Paid-in capital in excess of par value-Preferred stock	24,000
Paid-in capital in excess of par value-Common stock	360,000
Retained earnings	325,000
Total Stockholders' Equity	$1,809,000

The following transactions, among others, occurred during the year:

Jan.	12	Announced a 3-for-1 common stock split, reducing the par value of the common stock to $5 per share. The authorization was increased to 300,000 shares.
Mar.	31	Converted $41,000 face value of convertible bonds payable (the book value of the bonds was $43,000) to common stock. Each $1,000 bond converted to 125 shares of common stock.
June	1	Acquired equipment with a fair market value of $65,000 in exchange for 500 shares of preferred stock.
Sept.	1	Acquired 10,000 shares of common stock for cash at $11 per share.
Oct.	12	Sold 1,500 treasury shares at $13 per share.
Nov.	21	Issued 5,000 shares of common stock at $12 per share.
Dec.	28	Sold 1,200 treasury shares at $10 per share.
	31	Closed net income of $84,000 to the Retained Earnings account.

Required

Prepare journal entries for the given transactions and post them to the T-accounts. Do not prepare the journal entry for the Dec. 31 transaction, but post the appropriate amount to the Retained Earnings T-account. Determine the ending balances for the stockholders’ equity accounts.
Prepare the stockholders’ equity section of the balance sheet at December 31.

Stockholder's equity section
T-Accounts
Journal entries
Do not use negative signs with your answers.
Stockholders' Equity
Paid in Capital
Preferred Stock
550,000
Common Stock
650,625 v $ 1,200,625 v
Additional Paid-in-Capital
Paid-in-Capital in Excess of Par value -Preferred Stock
39,000
Paid-in-Capital in Excess of Par value - Common Stock
412,375
Paid-in-Capital from Treasury Stock
1,800
453,175
Total Paid-in-Capital
1,653,800
Retained Earnings
409,000
325,000 x
Less: Treasury Stock - Common
80,300
$ 1,982,500
Total Stockholders' Equity

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