Morrow Enterprises Inc. manufactures bathroom fixtures. The stockholders’ equity
ID: 2456063 • Letter: M
Question
Morrow Enterprises Inc. manufactures bathroom fixtures. The stockholders’ equity accounts of Morrow Enterprises Inc., with balances on January 1, 2016, are as follows:
The following selected transactions occurred during the year:
Closed the two dividends accounts to Retained Earnings.
Common Stock, $20 stated value (500,000 shares authorized, 375,000 shares issued) $ 7,500,000 Paid-In Capital in Excess of Stated Value—Common Stock 825,000 Retained Earnings 33,600,000 Treasury Stock (25,000 shares, at cost) 450,000Explanation / Answer
Jan 22
Dr Dividends Payable 28,000
Cr Cash 28,000
Apr 10
75,000 x $24= $1,800,000
Dr Cash 1,800,000
Cr Common Stock 1,500,000
Cr Paid-In Capital in Excess of Stated Value 300,000
*Note: There are now 350,000 + 75,000 = 425,000 shares outstanding.
June 6. Sold all of the treasury stock for 26 per share
=25000*26=$650,000
Dr Cash 650,000
Cr Common Treasury Stock 500,000
Cr Paid-In Capital From Sale of Treasury Stock 150,000
*There are now 425,000 + 25,000 = 450,000 shares outstanding
July 5. Declared a 4% stock dividend on common stock, to be capitalized at the market price of the stock, which is $20 per share.
450,000 x 4% x $25 = $450,000 stock dividend
450,000 x 4% x $20 stated value = $360,000 stock dividend distributable
Dr Stock Dividends 450,000
Cr Stock Dividends Distributable 360,000
Cr Paid-In Capital in Excess of Stated Value 90,000
Aug 15. Issued the certificates for the dividend declared on July 5.
Dr Stock Dividends Distributable 360,000
Cr Common Stock 360,000
*There are now 450,000 x 1.04 = 468,000 shares outstanding
Nov 23. Purchased 30,000 shares of treasury stock for 19 per share
Dr Treasury Stock 570,000
Cr Cash 570,000
*There are now 468,000 - 30,000 = 438,000 shares outstanding
Dec 28. Declared a $0.1-per-share dividend on common stock
438,000 x 0.1 = $43,800 dividend
Dr Cash Dividends 43,800
Cr Dividends Payable 43,800
31. Closed the credit balance of the income summary account, $1,125,000
Dr Income Summary 1,125,000
Cr Retained Earnings 1,125,000
31. Closed the two dividends accounts to Retained Earnings
Dr Retained Earnings 403,800
Cr Stock Dividends 360,000
Cr Cash Dividends 43,800