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Total stockholders’ equity. $11,262.432 Entries for selected corporate transactions Nav-Go Enterprises Inc. produces aeronautical navigation equipment. Navo-Go Enterprises’ stockholders’ equity accounts, with balances on January 1, 20Y1, are as follows: Common Stock, $5 stated value (900,000 shares authorized, 620,000 shares issued) $3,100,000 Paid-In Capital in Excess of Stated Value—Common Stock 1,240,000 Retained Earnings 4,875,000 Treasury Stock (48,000 shares, at cost) 288,000 The following selected transactions occurred during the year: Jan 15. Paid cash dividends of $0.06 per share on the common stock. The dividend had been property recorded when declared on December 1 of the preceding fiscal year for $34,320. Mar. 15. Sold all of the treasury stocks for $6.75 per share. Apr. 13. Issued 200,000 shares of common stock for $8 per share. June 14 Declared a 3% stock dividend on common stock, to be capitalized at the market price of the stock, which is $7.50 per share. July 16 Issued stock for stock dividend declared on June 14. Oct 30. Purchased 50,000 shares of treasury stock for $6 per share. Dec 30. Declared an $0.08 per-share dividend on common stock 31. Closed the two dividends accounts to Retained Earnings. Instructions 1. Enter the January 1 balances in T accounts for the stockholders equity accounts listed. Also prepare T accounts for the following: Paid-In Capital from Sale of Treasury Stock; Stock Dividends Distributable; Stock Dividends; Cash Dividends. 2. Journalize the entries to record the transactions, and post to the eight selected accounts. Assume that the closing entry for revenues and expenses has been made and post net income of $775,000 to the retained earnings account. 3. Prepare a statement of stockholders’ equity for the year ended December 31, 20Y1. Assume that net income was $775,000 for the year ended December 31, 20Y6. 4. Prepare the “Stockholders’ Equity” section of the December 31, 20Y1, balance sheet.

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Corporate Financial Accounting

15th Edition
Carl Warren + 1 other
Publisher: Cengage Learning
ISBN: 9781337398169

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BuyFindarrow_forward

Corporate Financial Accounting

15th Edition
Carl Warren + 1 other
Publisher: Cengage Learning
ISBN: 9781337398169
Chapter 12, Problem 12.4BPR
Textbook Problem
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Total stockholders’ equity. $11,262.432

Entries for selected corporate transactions

 Nav-Go Enterprises Inc. produces aeronautical navigation equipment. Navo-Go Enterprises’ stockholders’ equity accounts, with balances on January 1, 20Y1, are as follows:

Common Stock, $5 stated value (900,000 shares authorized, 620,000 shares issued) $3,100,000
Paid-In Capital in Excess of Stated Value—Common Stock     1,240,000
Retained Earnings 4,875,000
Treasury Stock (48,000 shares, at cost) 288,000

  The following selected transactions occurred during the year:

    Jan 15.    Paid cash dividends of $0.06 per share on the common stock. The dividend had been property recorded when declared on December 1 of the preceding fiscal year for $34,320.

    Mar. 15.    Sold all of the treasury stocks for $6.75 per share.

    Apr. 13.    Issued 200,000 shares of common stock for $8 per share.

    June 14    Declared a 3% stock dividend on common stock, to be capitalized at the market price of the stock, which is $7.50 per share.

    July 16    Issued stock for stock dividend declared on June 14.

    Oct 30.    Purchased 50,000 shares of treasury stock for $6 per share.

    Dec 30.    Declared an $0.08 per-share dividend on common stock

    31.    Closed the two dividends accounts to Retained Earnings.

  Instructions

1. Enter the January 1 balances in T accounts for the stockholders equity accounts listed. Also prepare T accounts for the following: Paid-In Capital from Sale of Treasury Stock; Stock Dividends Distributable; Stock Dividends; Cash Dividends.

2. Journalize the entries to record the transactions, and post to the eight selected accounts. Assume that the closing entry for revenues and expenses has been made and post net income of $775,000 to the retained earnings account.

3. Prepare a statement of stockholders’ equity for the year ended December 31, 20Y1. Assume that net income was $775,000 for the year ended December 31, 20Y6.

4. Prepare the “Stockholders’ Equity” section of the December 31, 20Y1, balance sheet.

(1) and (2)

To determine

To journalize: The transactions and post to the eight selected accounts.

Explanation of Solution

Journal entry: Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically.

Debit and credit rules:

  • Debit an increase in asset account, increase in expense account, decrease in liability account, and decrease in stockholders’ equity accounts.
  • Credit decrease in asset account, increase in revenue account, increase in liability account, and increase in stockholders’ equity accounts.

Record the transactions for Incorporation NE.

Date Account Titles and ExplanationDebit ($)Credit ($)
20Y1
January15 Cash Dividends Payable                             34,320
Cash34,320
(To record the payment of cash dividends)
March15 Cash (48,000 shares×$6.75) 324,000
 Treasury stock (48,000 shares×$6 per share (1) ) 288,000
Paid-in capital from treasury stock   ($324,000$288,000) 36,000
(To record sale of treasury stock for above the cost price of $6 per share)
April13 Cash (200,000 shares×$8) 1,600,000
Common Stock (200,000 shares×$5) 1,000,000
Paid-in Capital in Excess of stated value      Common Stock     ($1,600,000$1,000,000) 600,000
(To record issuance of 200,000 shares in excess of stated value)
June14 Stock Dividends                                      184,500
Common Stock Dividends Distributable                         123,000
Paid-in Capital in excess of Stated     Value-Common stock        61,500
(To record the declaration of stock dividends)
July16 Common Stock Dividends Distributable                               123,000
Common Stock123,000
(To record the distribution of stock dividends)
October30 Treasury stock (50,000 shares×$6 per share) 300,000
Cash300,000
(To record the purchase of 50,000 shares of treasury stock)
December30 Cash Dividends                                                                                           63,568
Cash Dividends Payable63,568
(To record the declaration of cash dividends)
December31 Income summary                                                       775,000
Retained Earnings775,000
(To close the income summary account)
December31 Retained Earnings248,068
Stock dividends                                 184,500
 Cash Dividends                                                                                         63,568
(To record the closing of stock dividends and cash dividends to retained earnings account)

Table (1)

Working note:

Calculate treasury stock cost per share.

Treasurystock=[TotalvalueoftreasurystockathandasonJanuary1,20Y1][NumberoftreasurystockathandasonJanuray1,20Y1]=$288,00048,000shares=$6 pershare (1)

Compute number of shares outstanding after the issuance of common stock on April 13.

NumberofsharesoutstandingafterthesaleoftreasurystockonJune6)=[NumberofsharesoutstandingasofJanuary1,20Y1+NumberoftreasurysharesissuedonApril13]=620,000shares+75,000shares=450,000shares (2)

Compute the stock dividends shares.

Stockdividendsshares=(NumberofsharesoutstandingafterthesaleoftreasurystockonJuneStockdividendpercentage)=820,000shares(2)×3%=24,600shares (3)

Compute the stock dividends amount payable to common stockholders

(3)

To determine

To prepare: Statement of stockholders’ equity the year ended December 31, 20Y1.

(4)

To determine

To prepare: The stockholders’ equity section of the December 31, 20Y1, balance sheet.

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Chapter 12 Solutions

Corporate Financial Accounting
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