Question

Ontario Company reports the following components of stockholders’ equity on January 1.

Common stock—$10 par value, 110,000 shares authorized, 40,000 shares issued and outstanding	$	400,000
Paid-in capital in excess of par value, common stock		60,000
Retained earnings		330,000
Total stockholders' equity	$	790,000

During the year, the following transactions affected its stockholders’ equity accounts.

Jan.		2		Purchased 4,000 shares of its own stock at $23 cash per share.
Jan.		5		Directors declared a $2 per share cash dividend payable on February 28 to the February 5 stockholders of record.
Feb.		28		Paid the dividend declared on January 5.
July		6		Sold 1,500 of its treasury shares at $27 cash per share.
Aug.		22		Sold 2,500 of its treasury shares at $20 cash per share.
Sept.		5		Directors declared a $2 per share cash dividend payable on October 28 to the September 25 stockholders of record.
Oct.		28		Paid the dividend declared on September 5.
Dec.		31		Closed the $444,000 credit balance (from net income) in the Income Summary account to Retained Earnings.

During the year, the following transactions affected its stockholders' equity accounts. Prepare the necessary journal entries. If no journal entry is required, select "No journal entry required" in the first input box.

Requirement General Journal General Ledger Trial Balance Statement of RE Stockholders || Equity Impact on Equity General Journal tab - Prepare the necessary journal entries. Statement of Retained Earnings tab - Prepare the Statement of Retained Earnings for the Ontario Corporation for the year ended December 31. Stockholders' Equity tab - Prepare the Stockholders' equity section of Ontario Corporation's December 31 balance sheet. Impact on Equity tab - For each transaction, indicate the total change in Stockholders' Equity, if any. Verify that total equity, as calculated, agrees with the amount reported on the Stockholders' Equity tab.

2) Jan 05) Directors declared a $2 per share cash dividend payable on Feb. 28 to the Feb. 5 stockholders of record.

3) Feb 28) Paid the dividend declared on January 5.

4) July 06) Sold 1,500 of its treasury shares at $27 cash per share.

5) Aug 22) Sold 2,500 of its treasury shares at $20 cash per share.

6) Sep 05 Directors declared a $2 per share cash dividend payable on October 28 to the September 25 stockholders of record.

7) Oct 28) Paid the dividend declared on September 5.

8) Dec 31) Closed the $444,000 credit balance (from net income) in the Income Summary account to Retained Earnings.

Options for Ontario Corporation

• Add: Cash dividends declared
• Add: Treasury stock reissuances
• Beginning retained earnings
• Ending retained earnings
• Less: Cash dividends declared
• Less: Treasury stock reissuances
• Revenues
• Sales

Options For Ontario Corporation

• Common dividend payable
• Common stock - $10 par value
• Income summary
• Paid-in capital in excess of par value, common stock
• Retained earnings
• Treasury stock reissuances

For each transaction, indicate the impact on total stockholders' equity. Enter decreases to equity as negative values. Verify that total Stockholders' equity as of December 31, as calculated, agrees with the amount reported on the balance sheet.

Options for the impact on equity

• Stockholders' equity increased
• Stockholders' equity decreased
• No change in total equity

Answer 1

		Debit	Credit
Jan.2	Treasury Stock	$                    92,000
	Cash		$       92,000
Jan.5	Retained Earnings	$                    72,000
	Dividend Payable		$       72,000
	No. of Common stock outstanding less No. of Treasury stock
	(40000-4000)*2
Feb.28	Dividend Payable	$                    72,000
	Cash		$       72,000
July.6	Cash	$                    40,500
	Treasury Stock		$       34,500
	Paid-in capital - Treasury Stock		$         6,000
Aug.22	Cash	$                    50,000
	Paid-in capital - Treasury Stock	$                      6,000
	Retained earnings (excess loss)	$                      1,500
	Treasury Stock		$       57,500
Sep.5	Retained Earnings	$                    80,000
	Dividend Payable		$       80,000
	(40000*2)
Oct.28	Dividend Payable	$                    80,000
	Cash		$       80,000
Dec.31	Income Summary	$                4,44,000
	Retained Earnings		$   4,44,000

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Adjusted Trial Balance	Debit	Credit
Cash	$                2,51,500
Accounts receivable	$                1,79,000
Equipment	$                7,15,000
Accumu. Depreciation		$       65,000
Common Stock		$   4,00,000
Paid in Capital, Common		$       60,000
Retained Earnings		$   6,20,500
Income		$                -
Dividend Payable
Treasury Stock	$                             -
	$              11,45,500	1145500

-

Statement of retained earnings
Beginning retained earnings	$                3,30,000
Revenues	$                4,44,000
	$                7,74,000
Less: Cash dividends declared	$                1,52,000
Less: Treasury stock re issuance	$                      1,500
Ending retained earnings	$                6,20,500

-

Stockholders Equity Section
Common stock - $10 par value	$                4,00,000
Paid-in capital in excess of par value, common stock	$                    60,000
Total Contributed Capital	$                4,60,000
Retained earnings	$                6,20,500
Total Stockholders equity	$              10,80,500

-

			Impact on Equity	$
Jan.	2	Purchased 4,000 shares of its own stock at $23 cash per share.	Stockholders' equity decreased	$     -92,000
Jan.	5	Directors declared a $2 per share cash dividend payable on February 28 to the February 5 stockholders of record.	Stockholders' equity decreased	$     -72,000
Feb.	28	Paid the dividend declared on January 5.	No change in total equity	0
July	6	Sold 1,500 of its treasury shares at $27 cash per share.	Stockholders' equity increased	$       40,500
Aug.	22	Sold 2,500 of its treasury shares at $20 cash per share.	Stockholders' equity increased	$       50,000
Sept.	5	Directors declared a $2 per share cash dividend payable on October 28 to the September 25 stockholders of record.	Stockholders' equity decreased	$     -80,000
Oct.	28	Paid the dividend declared on September 5.	No change in total equity	0
Dec.	31	Closed the $444,000 credit balance (from net income) in the Income Summary account to Retained Earnings.	Stockholders' equity increased	$   4,44,000

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