Problem 11-2A The stockholders\' equity accounts of Martinez Corp. on January 1,
ID: 2788108 • Letter: P
Question
Problem 11-2A The stockholders' equity accounts of Martinez Corp. on January 1, 2017, were as follows Preferred stock (7%, $100 par noncumulative, 5,000 shares authorized) Common Stock ($4 stated value, 300,000 shares authorized) Paid-in Capital in Excess of Par Value-Preferred Stock Paid-in Capital in Excess of Stated Value-Common Stock Retained Earnings Treasury Stock (5,000 common shares) $300,000 1,000,000 15,000 480,000 689,000 40,000 During 2017, the corporation had the following transactions and events pertaining to its stockholders' equity. Feb. 1 Issued 5,000 shares of common stock for $30,000. Mar. 20 Purchased 1,000 additional shares of common treasury stock at $8 per share. Oct. 1 Dedared a 7% cash dividend on preferred stock, payable November 1 Nov. 1 Paid the dividend declared on October Dec. 1 Declared a $0.50 per share cash dividend to common stockholders of record on December 15, payable December 31, 2017. Dec. 31 Determined that net income for the year was $275,700. Paid the dividend declared on December 1 ournalize the transactions. (Include entries to close net income and dividends to Retained Earnings.) (Record entries in the order displayed in the problem statement. 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 O for the amounts. Round answers to o decimal places, e.g. 5,275)Explanation / Answer
1. In the books of Martinez Corp.
2. Common Stock:
Paid-in Capital in Excess of Stated Value : Common Stock
Retained Earnings:
Treasury Stock
3. Martinez Corp
Partial Balance Sheet
4. Payout Ratio = $ ( 21,000 + 124,500) / $ 275,700 * 100 = 52.8 %
Earnings per share = $ ( 275,700 - 21,000) / 249,000 shares = $ 1.02
Return on common shareholders equity = $ ( 275,700 - 21,000) / ( 972,000 + 490,000 + 819,200) = $ 254,700 / $ 2,281,200 * 100 = 11.2 %.
Date Account Titles Debit Credit 2017 $ $ Feb 1 Cash 30,000 Common Stock 20,000 Paid-in Capital in Excess of Stated Value 10,000 Mar 20 Treasury Stock 8,000 Cash 8,000 Oct 1 Retained Earnings 21,000 Dividends Payable : Preferred Stock 21,000 Nov 1 Dividends Payable: Preferred Stock 21,000 Cash 21,000 Dec 1 Retained Earnings 124,500 Dividends Payable : Common Stock 124,500 Dec 31 Dividends Payable: Common Stock 124,500 Cash 124,500 Dec 31 Income Summary 275,700 Retained Earnings 275,700