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Common stock—$10 par value, 100,000 shares authorized, 40,000 shares issued and outstanding $ 400,000 Paid-in capital in excess of par value, common stock 60,000 Retained earnings 270,000 Total stockholders' equity $ 730,000 In year 2017, the following transactions affected its stockholders’ equity accounts. Jan. 1 Purchased 4,000 shares of its own stock at $20 cash per share. Jan. 5 Directors declared a $2 per share cash dividend payable on February 28 to the February 5 stockholders of record. Feb. 28 Paid the dividend declared on January 5. July 6 Sold 1,500 of its treasury shares at $24 cash per share. Aug. 22 Sold 2,500 of its treasury shares at $17 cash per share. Sept. 5 Directors declared a $2 per share cash dividend payable on October 28 to the September 25 stockholders of record.

Respuesta :

TomShelby

Answer:

treasury stock    80,000 debit

             cash                  80,000 credit

dividends           72,000 debit

            dividends payable     72,000 credit

dividends payable     72,000 debit

            cash                     72,000 credit

cash                    36,000

       treasury stock             30,000 credit

       add paid-in TS              6,000 credit

cash                    42,500 debit

add paid-in TS      6,000 debit

retained earnings 1,500 debit

       treasury stock             50,000 credit

dividends           80,000 debit

            dividends payable     80,000 credit

dividends payable     80,000 debit

            cash                     80,000 credit

Explanation:

Sept. 5 Directors declared a $2 per share cash dividend payable on October 28 to the September 25 stockholders of record

Jan 1st: The treasury stock are recorded at cost

Jan 5th

40,000 - 4,000 = 36,000 shares outstanding

                          x 2 dividend per share

dividends             72,000

Feb 28th we write-off the payable and decrease cash

July 6th

proceeds 1,500 x $24 = 36,000

cost          1,500 x $20 = 30,000  

additional paid-in              6,000

August 22

proceeds 2,500 x $17 =  42,500

cost          2,500 x $20 = 50,000  

"loss"                                  (7,500)

we cannot declare loss when selling own share, we first decrease the additional paid-in treasury stock and if needed like in this case; we decrease retained earings

Sep 5th

there are 40,000 outstanding  x $2 = 80,000

Oct 28th we write-off the payable and decrease cash

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