Financial Accounting: An Integrated Statements Approach, 2nd Edition

Chapter 11 Stockholders’ Equity: Capital Stock and Dividends 527

During the year, the corporation completed a number of transactions affecting the stock-

holders’ equity. They are summarized as follows:

a. Issued 7,500 shares of common stock at $24, receiving cash.

b. Sold 800 shares of preferred 2% stock at $81.

c. Purchased 3,000 shares of treasury common for $66,000.

d. Sold 1,800 shares of treasury common for $50,400.

e. Sold 750 shares of treasury common for $14,250.

f. Declared cash dividends of $1.50 per share on preferred stock and $0.40 per share on

common stock.

g. Paid the cash dividends.

Instructions

Journalize the entries to record the transactions. Identify each entry by letter.

Shoshone Enterprises Inc. manufactures bathroom fixtures. The stockholders’ equity accounts of

Shoshone Enterprises Inc., with balances on January 1, 2007, are as follows:

Common Stock, $20 stated value (100,000 shares authorized, 75,000 shares issued) $1,500,000

Paid-In Capital in Excess of Stated Value 180,000

Retained Earnings 725,000

Treasury Stock (5,000 shares, at cost) 140,000

The following selected transactions occurred during the year:

Jan. 28 Paid cash dividends of $0.80 per share on the common stock. The dividend had been

properly recorded when declared on December 30 of the preceding fiscal year

for $56,000.

Mar. 21 Issued 15,000 shares of common stock for $480,000.

May 10 Sold all of the treasury stock for $165,000.

July 1 Declared a 4% stock dividend on common stock, to be capitalized at the market price of

the stock, which is $36 a share.

Aug. 11 Issued the certificates for the dividend declared on July 1.

Oct. 20 Purchased 7,500 shares of treasury stock for $255,000.

Dec. 27 Declared a $0.75-per-share dividend on common stock.

In addition, Shoshone had net income of $269,400 during the current year.

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.


2. Journalize the entries to record the transactions, and post to the six selected accounts.


3. Prepare a retained earnings statement for the year ended December 31, 2007.


4. Prepare the Stockholders’ Equity section of the December 31, 2007, balance sheet.

Selected transactions completed by Mead Boating Supply Corporation during the current fiscal

year are as follows:

Jan. 20 Split the common stock 5 for 1 and reduced the par from $50 to $10 per share. After the

split, there were 500,000 common shares outstanding.

Apr. 1 Purchased 20,000 shares of the corporation’s own common stock at $30 recording the

stock at cost.

May 1 Declared semiannual dividends of $1.50 on 24,000 shares of preferred stock and $0.15 on

the common stock to stockholders of record on May 20, payable on June 1.

June 1 Paid the cash dividends.

Alternate Problem
11-4B

Entries for selected corporate
transactions

Goals3, 4, 7, 8

4. Total stockholders’ equity,
   $2,859,825

GENERAL LEDGER

Alternate Problem
11-5B

Entries for selected corporate
transactions

Goals3, 4, 5, 7

GENERAL LEDGER