Question

Question:

Alexander Corporation reports the following components of stockholders’ equity on December 31, 2016:

Common stock—\(25 par value, 50,000 shares authorized,

30,000 shares issued and outstanding . . . . . . . . . . . . . . . . . . . . . . . . \) 750,000

Paid-in capital in excess of par value, common stock . . . . . . . . . . . . . . . 50,000

Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 340,000

Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . \(1,140,000

In year 2017, the following transactions affected its stockholders’ equity accounts.

Jan. 2 Purchased 3,000 shares of its own stock at \)25 cash per share.

Jan. 7 Directors declared a \(1.50 per share cash dividend payable on February 28 to the February 9 stockholders of record.

Feb. 28 Paid the dividend declared on January 7.

July 9 Sold 1,200 of its treasury shares at \)30 cash per share.

Aug. 27 Sold 1,500 of its treasury shares at \(20 cash per share.

Sep. 9 Directors declared a \)2 per share cash dividend payable on October 22 to the September 23 stockholders of record.

Oct. 22 Paid the dividend declared on September 9.

Dec. 31 Closed the $52,000 credit balance (from net income) in the Income Summary account to Retained Earnings.

Required

1. Prepare journal entries to record each of these transactions for 2017.

2. Prepare a statement of retained earnings for the year ended December 31, 2017.

3. Prepare the stockholders’ equity section of the company’s balance sheet as of December 31, 2017.

Short answer

Answer

1. Given below.
2. Given below
3. Given below

Step-by-step solution

Recording of Entries

Date	Account and explanation	Debit	Credit
January 02	Treasury Stock, Common Cash Purchased 3,000 common shares at $25 per share.	75,000	75,000
January 07	Retained Earnings Common Dividend Payable Declared $1.5 per common share cash dividend	40,500	40,500
February 28	Common Dividend Payable Cash Paid $1.5 per common share cash dividend	40,500	40,500
July 09	Cash Treasury Stock, Common Paid-In Capital, Treasury Stock Received $30 per share for 1200 treasury shares costing $25 per share	36,000	30,000 6,000
August 27	Cash Paid-In Capital, Treasury Stock Retained Earnings Treasury Stock, Common Received $20 per share for 1500 treasury shares costing $25 per share	30,000 6,000 1,500	37,500
September 09	Retained Earnings Common Dividend Payable Declared $2 per common share cash dividend	59,400	59,400
October 22	Common Dividend Payable Cash Paid $2 per common share cash dividend	59,400	59,400

$$\begin{gathered} \mathit{D}\mathit{i}\mathit{v}\mathit{i}\mathit{d}\mathit{e}\mathit{n}\mathit{d}\mathbf{}\mathit{P}\mathit{a}\mathit{y}\mathit{a}\mathit{b}\mathit{l}\mathit{e}\left(Jan07\right)\mathbf{=}\mathit{N}\mathit{u}\mathit{m}\mathit{b}\mathit{e}\mathit{r}\mathbf{}\mathit{o}\mathit{f}\mathbf{}\mathit{S}\mathit{h}\mathit{a}\mathit{r}\mathit{e}\mathit{s}\mathbf{}\mathit{O}\mathit{u}\mathit{t}\mathit{s}\mathit{t}\mathit{a}\mathit{n}\mathit{d}\mathit{i}\mathit{n}\mathit{g}\mathbf{}\mathit{A}\mathit{f}\mathit{t}\mathit{e}\mathit{r}\mathbf{}\mathit{R}\mathit{e}\mathit{p}\mathit{u}\mathit{r}\mathit{c}\mathit{h}\mathit{a}\mathit{s}\mathit{e}\mathbf{\times }\mathit{C}\mathit{a}\mathit{s}\mathit{h}\mathbf{}\mathit{D}\mathit{i}\mathit{v}\mathit{i}\mathit{d}\mathit{e}\mathit{n}\mathit{d} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\left(30,000-3,000\right)\mathbf{\times }\mathbf{\$}\mathbf{1}\mathbf{.}\mathbf{50} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\mathbf{\$}\mathbf{40}\mathbf{,}\mathbf{500} \\ \mathit{D}\mathit{i}\mathit{v}\mathit{i}\mathit{d}\mathit{e}\mathit{n}\mathit{d}\mathbf{}\mathit{P}\mathit{a}\mathit{y}\mathit{a}\mathit{b}\mathit{l}\mathit{e}\left(Sep09\right)\mathbf{=}\mathit{N}\mathit{u}\mathit{m}\mathit{b}\mathit{e}\mathit{r}\mathbf{}\mathit{o}\mathit{f}\mathbf{}\mathit{S}\mathit{h}\mathit{a}\mathit{r}\mathit{e}\mathit{s}\mathbf{}\mathit{O}\mathit{u}\mathit{t}\mathit{s}\mathit{t}\mathit{a}\mathit{n}\mathit{d}\mathit{i}\mathit{n}\mathit{g}\mathbf{}\mathit{A}\mathit{f}\mathit{t}\mathit{e}\mathit{r}\mathbf{}\mathit{R}\mathit{e}\mathit{p}\mathit{u}\mathit{r}\mathit{c}\mathit{h}\mathit{a}\mathit{s}\mathit{e}\mathbf{\times }\mathit{C}\mathit{a}\mathit{s}\mathit{h}\mathbf{}\mathit{D}\mathit{i}\mathit{v}\mathit{i}\mathit{d}\mathit{e}\mathit{n}\mathit{d} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\left(30,000-3,000+1,200+1,500\right)\mathbf{\times }\mathbf{\$}\mathbf{2} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\mathbf{\$}\mathbf{59}\mathbf{,}\mathbf{400} \end{gathered}$$

Statement of Retained Earnings

Alexander Corporation Statement of Retained Earnings For Year Ended December 31, 2017
Retained Earnings as at December 31, 2016	$ 340,000
Add: Net Income for the year	52,000
Less: Loss of sale of treasury stock	(1,500)
Less: Cash Dividend (40,500+59,400)	(99,900)
Retained Earnings as at December 31, 2017	$ 290,600

Stockholders’ Equity     

	Amount
Common stock—$25 par value, 50,000 shares authorized, 30,000 shares issued and outstanding	$ 750,000
Paid-in capital in excess of par value, common stock	50,000
Retained Earnings	$ 290,600
Less: Cost of treasury stock(25*300)	(7,500)
Total stockholders’ equity	$ 1,083,100