Information: Retro Corp. began business January 1, 2018. The following transacti
ID: 2605028 • Letter: I
Question
Information:
Retro Corp. began business January 1, 2018. The following transactions, impacting owners’ equity, occurred between January 1, 2018 and December 31, 2020 (the current date):
1) On January 1, 2018, Renfro received authorization to issue 100,000 shares of $1 par value common stock. During 2018, 60,000 shares were issued at $30 per share.
2) On January 1, 2018, Renfro received authorization to issue 50,000 shares of 5%, $10 par value preferred stock. During 2018, 40,000 shares were issued at $100 per share.
3) On October 31, 2019, Renfro declared a 15% common stock dividend (i.e. the dividend was payable TO common stockholders and the payment was in the form of additional shares of common stock). At the time the dividend was declared, the market price of the stock was $43.
4) On November 3, 2019, Renfro issued the stock from the dividend declared on October 31st .
5) On March 31, 2020, Renfro purchased 5,000 shares of the company’s own common stock for the treasury at $45 per share. Renfro uses the cost method to record treasury stock transactions.
6) On November 30, 2009, reissued 1,200 of the treasury shares for $42 per share.
Additionally, during the three year period, Renfro reported total net income of $950,000 and paid total cash dividends of $180,000.
REQUIRED:
1. Prepare journal entries related to transactions 1-6.
2. Prepare the December 31, 2020 Owners’ Equity section of Retro’s balance sheet IN GOOD FORM*. Use the following heading: Renfro Corp. Owners’ Equity As of 12/31/2020
Explanation / Answer
If any doubt please comment.
Transaction General journal Dr Cr 1) Cash $1,800,000 Common stock (60000*1) 60000 Paid in capital in excess of par-Common stock (60000*29) $1,740,000 2) Cash $4,000,000 Preferred stock (40000*10) $400,000 Paid in capital in excess of par-Preferred stock (40000*90) $3,600,000 3) Oct 31 2019 Retained Earnings $387,000 Stock Dividend payable (60000*15%*43) $387,000 (No. of stock issued as stock dividend=60000*15%= 9000) 4) Stock Dividend payable $387,000 Nov 3 2019 Common stock (9000*1) $9,000 Paid in capital in excess of par-Common stock (9000*42) $378,000 5) Treasury Stock $225,000 Mar 31 2020 Cash (5000*45) $225,000 6) Cash (1200*42) $50,400 30-Nov Retained Earnings (1200*3) $3,600 Treasury Stock (1200*45) $54,000 Additional entries Retained Earnings $950,000 Income summary $950,000 Cash dividend $180,000 Retained Earnings $180,000 Ans 2 Renfro Corp. Owners’ Equity As of 12/31/2020 Preferred stock $400,000 Paid in capital in excess of par-Preferred stock $3,600,000 Common stock $69,000 Paid in capital in excess of par-Common stock $2,118,000 Total paid in capital Retained Eranings 379400 Total paid in capital and Retained Eranings 379400 Less: Treasury stock (3800*45) 171000 Ending Balance 208400 working Statement of Retained Eranings Net Income 950000 Less: Cash dividend ($180,000) Stock Dividend ($387,000) Treasury Stock ($3,600) Ending balance 379400