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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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Gray Company lists the following shareholders’ equity items on its December 31, 2018, balance sheet:

Chapter 16, Problem 14P, Gray Company lists the following shareholders equity items on its December 31, 2018, balance sheet: , example  1

The following stock transactions occurred during 2019:

Chapter 16, Problem 14P, Gray Company lists the following shareholders equity items on its December 31, 2018, balance sheet: , example  2

Required:

  1. 1. Prepare journal entries to record the preceding transactions.
  2. 2. Prepare the December 31, 2019, shareholders’ equity section (assume that 2019 net income was $225,000).

1.

To determine

Prepare necessary journal entry to record the given transactions.

Explanation

Stockholders’ Equity Section:

It is refers to the section of the balance sheet that shows the available balance stockholders’ equity as on reported date at the end of the financial year.

DateAccount Titles and explanationDebit ($)Credit ($)
January 4, 2019Cash (3,000×25)75,000 
      Common stock , at $10par 10,000
 

     Additional paid-in capital from stock

     dividend

 45,000
 ( To record the issuance of 1000 share of common stock at $40 per share)  
    
January 30, 2019Dividend payable: Preferred (($100×8%)×1,200)9,600 
 Dividend payable: Common (1)32,000 
      Cash 41,600
 (To record declaration of preferred and common stock)  
    
March 2, 2019Cash (400×$125)15,000 
      Preferred stock, $100 par1,500 
 

     Additional paid-in capital on preferred

     stock

 5,000
  ( To record issuance of preferred stock) 11,500
    
March 7, 2019Cash (600×$24)8,200 
      Treasury stock (600×$21) 6,200
 

     Additional paid-in capital on common     

     stock

 2,000
  (To record the reissuance of treasury stock)  
    
June 15, 2019No entry  is required  
    
June 15, 2019No entry  is required  
    

July 2,

2019

Retained earnings (2)27,440 
 

     Common stock to be distributed

     (1,960×$5)

 9,800
 

     Additional paid-in capital from stock

     dividend

 17,640
 (To record declaration of stock dividend)  
    
August 3,2019Common stock to be  distributed9,800 
      Common stock, $5 par 9,800
  (To record the issuance of stock dividend)  
    
October 1,2019Allowance  for  change in value of investment (2,000×[$16$15])2,000 
 Unrealized increase in the value of available-for-sale of securities (2,000×[$15$12])6,000 
 

     Gain on disposal of investment

     (2,000×[$16$12])

 8,000
 (To record the declaration of property  dividend)  
    
 Retained earnings (2,000×$16)32,000 
      Property dividend payable 32,000

2.

To determine

Prepare Company G’s statement of stockholder’s equity section for 2016.

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