Question

Help Save & At the beginning of 2018, Thompson Service, Inc., showed the following amounts in the stockholders' equity section of its balance sheet. Stockholders' equity! Capital stock, $1 par value, 500,000 shares authorized, 382,000 issued and outstanding Additional paid-in capital: capital stock Total paid-in capital Retained earnings Total stockholders' equity $ 382,000 4,202.000 $ 4,584,000 2,704,600 $ 7,288,600 The transactions relating to stockholders' equity during the year are as follows. Jan. 3 Declared a dividend of $1 per share to stockholders of record on January 31, payable on February 15. Feb. 15 Paid the cash dividend declared on January 3. Apr. 12 The corporation purchased 6,000 shares of its own capital stock at a price of $40 per share. May 9 Reissued 4,000 shares of the treasury stock at a price of $44 per share. June 1 Declared a 5 percent stock dividend to stockholders of record at June 15, to be distributed on June 30. The market price of the stock at June 1 was $42 per share. (The 2,000 shares remaining in the treasury do not participate in the stock dividend.) June 30 Distributed the stock dividend declared on June 1. Aug. 4 Reissued 600 of the 2,000 remaining shares of treasury stock at a price of $37 per share. Dec. 31 The Income Summary account, showing net income for the year of $1,928,000, was closed into the Retained Earnings account. Dee. 31 The $382,000 balance in the Dividends account was closed into the Retained Earnings account. Required: a. Prepare in general journal form the entries to record the above transactions. b. Prepare the stockholders' equity section of the balance sheet at December 31, 2018. Include a supporting schedule showing your computation of retained earnings at that date. c. Compute the maximum cash dividend per share that legally could be declared at December 31, 2018, without impairing the paid in capital of Thompson Service. (Hint: The availability of retained earnings for dividends is restricted by the cost of treasury stock owned. Required A Required B Required C Prepare in general Journal form the entries to record the above transactions. (if no entry is required for a transaction/event, select "No

Answer 1

Stockholder's Equity: Incorporation T Blance sheet ( Partial) At December 31, 2018 Amountek Amount Capital stock: $1 par Value 500,000 shares authorized 49,000 shares issued and outstanding 401,000 Additional Paid - in capital: Issuance of capital stock 4202000 Stock Dividend 779,000 Treasury stocks 14,200 14,995, 200 Total paid-in capital 5,396,200 Retained Earnings 3452 606 8848,800 Less: Treasury stuck (1,400 shares & $40 per 56,000 Toted stock holder's Equity 8792800 - Computation of retained Earnings at Dec. 31,2018 Retained earnings at the beginning of 2018 2,704, 600 Add: Net Income 1928,000 4,632,600 I Less: Cash Dividend 382, 000 stock dividend to be distributed 798,000 1,189,000 Retained Garning at Dec. 31, 2018 3,452,600 - share)

Credit Janz 382,000 389,000 940000 Moya 160,000 16,000 Date Account Titles and Explanation Debit Dividends 389.000 Dividends Payable .. ..a To record declaration of a cash divident of $1 per Share on the 389000 shares of capital stock (outstanding. Payable Feb. 15 to stockholders of record on Jana Feb. 15 Dividends Payable 389,000 - Cash ---- To record Payment of $1 per share dwidend declare Jan 3 do stockholders of record on Jan 31 Apr 12 Toreas wy stock .............-- 240,000 Cash - - - - Purchase of 6000 shares of $1 par treasury stock at $40 Per share wिing Engी- | Cash ......... ... ----- Treaswey stock - - 176,000 Additional Paid-in capital. Treasury stock... Sold 4,000 shares of treasury stock, which Cost & 160,000 at a price of $44 per share Retained Earnings ...... - 810,600 Stock Dividend to be distributed ...... Additional Paid-in capital: stock Dividends.... Declared at 5t stock dividend Consisting 19,300 shares (386,000x 51.) of $1 par value capital Stock Market price $42 Per share. Distributable June 30 to stock holders of record on June 1s June 30 stock Dividend to be distributed...na 19,300 - Common stock. .. Distributed 19,300 share stock dividend declare June 1 Aug. 4 Cash on Additional Paid in capital. Treasway stock. sold 600 shares of treasway stock which Cost $24000 at a price of $37 Per share no n na 1998000 Dec 31 Income Summary - Retained Earnings ...... To close Income summary account Retained .. 389,000 Earnings non. Dividends. To close Dividends account 19,300 791,300 19,300 -- --- --- - - 22200 Toteaswy stock 24000 cisoo) 1928000 Earnings ... 382000 Dec 31 Retained