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.

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 11.13MCP

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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.

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