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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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Statement of Stockholders' Equity

At the end of 2019, Stanley Utilities Inc. had the following equity accounts and balances:

Chapter 10, Problem 84PSA, Statement of Stockholders' Equity At the end of 2019, Stanley Utilities Inc. had the following

During 2020, Haley engaged in the following transactions involving its equity accounts:

  1. Sold 5,000 shares of common stock for $19 per share.
  2. Sold 1.200 shares of 12%, $50 par preferred stock at $75 per share.
  3. Declared and paid cash dividends of $22,000.
  4. Repurchased 1,000 shares of treasury stock (common) for $24 per share.
  5. Sold 300 of the treasury shares for $26 per share.

Required:

  1. Prepare the journal entries for Transactions a through e.
  2. Assume that 2020 net income was $123,700. Prepare a statement of stockholders’ equity at December 31, 2020.

To determine

Concept introduction:

Treasury stock:

Treasury stock is the shares bought back by the company itself. A company may purchase its own shares and the shares bought back are called treasury stock. The journal entries are made at the time of sale and purchase of treasury stock as follows:

  • For Purchase of treasury stock:

    Treasury stock account is debited and cash account is credited with the cost of treasury stock purchased.

  • For Sale / Reissuance of treasury stock:

    Cash account is debited for the amount received on sale of treasury stock and the Treasury stock account is credited with the cost of treasury stock. For the difference in cost and sale value, Additional Paid in Capital and Retained earnings accounts are adjusted.

Requirement 1:

To prepare:

The Journal entries for the given transactions.

Explanation

The Journal entries for the given transactions are explained as follows:

Journal Entries
# Account Titles Debit Credit
a. Cash (5000 Shares @ $19) $95,000
Common Stock (5000 Shares @ $10) $ 50,000
Paid in Capital In excess of Par- Common Stock $ 45,000
(Being Common Stock sold for cash)
b. Cash (1200 Shares @ $75) $90,000
Preferred Stock (1200 Shares @ $50) $ 60,000
Paid in Capital In excess of Par- Preferred Stock $ 30,000
(Being Preferred Stock sold for cash)
c...
To determine

Concept introduction:

Treasury stock:

Treasury stock is the shares bought back by the company itself. A company may purchase its own shares and the shares bought back are called treasury stock. The journal entries are made at the time of sale and purchase of treasury stock as follows:

  • For Purchase of treasury stock:

    Treasury stock account is debited and cash account is credited with the cost of treasury stock purchased.

  • For Sale / Reissuance of treasury stock:

    Cash account is debited for the amount received on sale of treasury stock and the Treasury stock account is credited with the cost of treasury stock. For the difference in cost and sale value, Additional Paid in Capital and Retained earnings accounts are adjusted.

Requirement 2:

To prepare:

The Stockholder’s Equity Section.

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Ch-10 P-11DQCh-10 P-12DQCh-10 P-13DQCh-10 P-14DQCh-10 P-15DQCh-10 P-16DQCh-10 P-17DQCh-10 P-18DQCh-10 P-19DQCh-10 P-20DQCh-10 P-21DQCh-10 P-22DQCh-10 P-23DQCh-10 P-24DQCh-10 P-25DQCh-10 P-26DQCh-10 P-27DQCh-10 P-28DQCh-10 P-29DQCh-10 P-30DQCh-10 P-31DQCh-10 P-32DQCh-10 P-33DQCh-10 P-34DQCh-10 P-1MCQCh-10 P-2MCQCh-10 P-3MCQCh-10 P-4MCQCh-10 P-5MCQCh-10 P-6MCQCh-10 P-7MCQCh-10 P-8MCQCh-10 P-9MCQCh-10 P-10MCQCh-10 P-11MCQCh-10 P-12MCQCh-10 P-13MCQCh-10 P-14MCQCh-10 P-15MCQCh-10 P-16MCQCh-10 P-17MCQCh-10 P-18MCQCh-10 P-19MCQCh-10 P-20MCQCh-10 P-21MCQCh-10 P-22MCQCh-10 P-23MCQCh-10 P-24MCQCh-10 P-25CECh-10 P-26CECh-10 P-27CECh-10 P-28CECh-10 P-29CECh-10 P-30CECh-10 P-31CECh-10 P-32CECh-10 P-33CECh-10 P-34CECh-10 P-35CECh-10 P-36CECh-10 P-37CECh-10 P-38CECh-10 P-39BECh-10 P-40BECh-10 P-41BECh-10 P-42BECh-10 P-43BECh-10 P-44BECh-10 P-45BECh-10 P-46BECh-10 P-47BECh-10 P-48BECh-10 P-49BECh-10 P-50BECh-10 P-51BECh-10 P-52BECh-10 P-53BECh-10 P-54BECh-10 P-55BECh-10 P-56ECh-10 P-57ECh-10 P-58ECh-10 P-59ECh-10 P-60ECh-10 P-61ECh-10 P-62ECh-10 P-63ECh-10 P-64ECh-10 P-65ECh-10 P-66ECh-10 P-67ECh-10 P-68ECh-10 P-69ECh-10 P-70ECh-10 P-71ECh-10 P-72ECh-10 P-73ECh-10 P-74ECh-10 P-75ECh-10 P-76ECh-10 P-77ECh-10 P-78ECh-10 P-79ECh-10 P-80ECh-10 P-81PSACh-10 P-82PSACh-10 P-83PSACh-10 P-84PSACh-10 P-85PSACh-10 P-86PSACh-10 P-87PSACh-10 P-88PSACh-10 P-81PSBCh-10 P-82PSBCh-10 P-83PSBCh-10 P-84PSBCh-10 P-85PSBCh-10 P-86PSBCh-10 P-87PSBCh-10 P-88PSBCh-10 P-89.1CCh-10 P-89.2CCh-10 P-90.1CCh-10 P-90.2CCh-10 P-91CCh-10 P-92.1CCh-10 P-92.2CCh-10 P-92.3CCh-10 P-92.4CCh-10 P-92.5CCh-10 P-93.1CCh-10 P-93.2CCh-10 P-93.3CCh-10 P-93.4CCh-10 P-93.5CCh-10 P-93.6CCh-10 P-94.1CCh-10 P-94.2CCh-10 P-94.3CCh-10 P-94.4CCh-10 P-94.5CCh-10 P-94.6CCh-10 P-95.1CCh-10 P-95.2C

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