Problem 14-2A The stockholders’ equity accounts of Karp Company at January 1, 20
ID: 2395009 • Letter: P
Question
Problem 14-2A
The stockholders’ equity accounts of Karp Company at January 1, 2017, are as follows:
There were no dividends in arrears on preferred stock. During 2017, the company had the following transactions and events.
Recognized a $212,000 restriction of retained earnings for plant expansion.
Journalize the transactions, events, and closing entries for net income and dividends. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Record journal entries in the order presented in the problem.)
Date
Account Titles and Explanation
Debit
Credit
(To close net income)
(To close cash dividends)
(To close stock dividends)
Enter the beginning balances in the accounts, and post to the stockholders’ equity accounts. (Note: Open additional stockholders’ equity accounts as needed.) (Post entries in the order of journal entries presented in the previous part.)
Preferred Stock
Date
Explanation
Ref
Debit
Credit
Balance
Balance
?
Common Stock
Date
Explanation
Ref
Debit
Credit
Balance
Balance
?
Common Stock Dividends Distributable
Date
Explanation
Ref
Debit
Credit
Balance
Paid-in Capital in Excess of Par—Preferred Stock
Date
Explanation
Ref
Debit
Credit
Balance
Balance
?
Paid-in Capital in Excess of Par—Common Stock
Date
Explanation
Ref
Debit
Credit
Balance
Balance
?
Retained Earnings
Date
Explanation
Ref
Debit
Credit
Balance
Balance
?
Prior period adjustment—depreciation expense understated
Net income
Cash dividends
Stock dividends
Cash Dividends
Date
Explanation
Ref
Debit
Credit
Balance
Stock Dividends
Date
Explanation
Ref
Debit
Credit
Balance
Prepare a retained earnings statement for the year. (List items that increase retained earnings first.)
Prepare a stockholders’ equity section at December 31, 2017. (Enter account name only and do not provide descriptive information.)
Explanation / Answer
2)
1) Journal entries: Date Accounts Titles Debit $ Credit $ 1-Jul Dividend 114450 Dividend payable 114450 (being cash dividend made payable) 1-Aug Retained Earnings 29000 Prior period adjustment 29000 (being dep understatement booked) 1-Sep Dividend payable 114450 Cash 114450 (being cash dividend paid) 1-Dec Retained Dividend 245250 CS distributable 114450 Paid in capital in excess of Par - CS 130800 (being 16350 stock dividend made @ $15) 15-Dec Pref dividend 33000 Pref dividend payable 33000 (being 6% pref dividend declared) 31-Dec Income Summary 359000 Retained Earnings 359000 (being net income transferred to RE) 31-Dec RE 212000 RE - plant expansion reserved 212000 (being restriction on RE towards plant expansion) 31-Dec RE 147450 Dividend 114450 Pref dividend 33000 (being dividend declared transferred to RE)