1.
Journal entry isreferred as recording of monetary transactions that are related to the business in such a way that debit will be equal to the credit.
To determine: Preparation of Journal Entries for 2016.
1.
Answer to Problem 2PSB
Net Income is equal to $1,072,000.
Explanation of Solution
Date | Account Title | Debit ($) | Credit ($) |
10-Jan | 480,000 | ||
……Cash | 480,000 | ||
2-March | 240,000 | ||
…….Common Dividend Payable | 240,000 | ||
31-March | Common Dividend Payable | 240,000 | |
…….Cash | 240,000 | ||
11-Nov. | Cash | 312,000 | |
…….. Treasury stock | 288,000 | ||
……..Paid-in Capital in excess of par | 24,000 | ||
25-Nov | Cash | 152,000 | |
Paid-in Capital in excess of par | 24,000 | ||
Retained Earnings | 16,000 | ||
…….. Treasury stock | 192,000 | ||
01-Dec | Retained Earnings | 500,000 | |
……… Common Dividend Payable | 500,000 | ||
01-Dec | Income Summary | 1,072,000 | |
…….Retained Earnings | 1,072,000 | ||
2.
Retained Earnings
Retained Earnings isreferred as an accumulated net income which is retained by the company at a particular point of time.
To Determine: Preparation of statement of Retained Earnings.
2.
Answer to Problem 2PSB
Retained Earnings on December 31, 2016 is equal to 2,476,000.
Explanation of Solution
Statement of Retained Earnings
For the year ended December 31, 2016
Retained earnings, December 31, 2015 | $2,160,000 |
Add: Net Income | $1,072,000 |
$3,232,000 | |
Less: Cash dividends declared (240,000 + 500,000) | ($740,000) |
Less: loss on sale of treasury stock | ($16,000) |
Retained earnings, December 31, 2016 | $2,476,000 |
Working notes:
Purchase price of stock= 4000 × 12 = $480,000
Sale price of stock= (2,4000 × 13) + (16,000 × 9.5)
= 312,000 + 152,000
= $464,000
Loss on issue of treasury stock= $480,000 - $464,000 = $16,000
Stockholder’s equity is also known as shareholder’s equity. Stockholder’s equity s one of the section of balance sheet. It can be calculating by rearranging the following equation:
Stockholder’s Equity = Assets - Liabilities |
To determine: Preparation of stockholder’s equity section of balance sheet.
Answer to Problem 2PSB
Total stockholder’s equity is equal to $4,076,000.
Explanation of Solution
Stockholder’s Equity Section of the balance sheet
For the year ended December 31, 2016
Common Stock | |
Authorized 320,000 shares @$1 par | |
Issued 200,000 shares and outstanding | |
200,000 shares | 200,000 |
Paid-in capital in excess of par value, common stock | 1,400,000 |
Total contribution | 1,600,000
|
Retained Earnings | $2,476,000 |
Shareholder’s Equity, December 31, 2016 | $4,076,000 |
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Chapter 11 Solutions
FINANCIAL ACCT.:INFO...(LL)
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