Question

Alexander Corporation reports the following components of stockholders’ equity on December 31, 2016:

Common stock—$25 par value, 70,000 shares authorized, 42,000 shares issued and outstanding	$	1,050,000
Paid-in capital in excess of par value, common stock		84,000
Retained earnings		382,000
Total stockholders’ equity	$	1,516,000

In year 2017, the following transactions affected its stockholders’ equity accounts.

Jan.		2		Purchased 4,200 shares of its own stock at $25 cash per share.
Jan.		7		Directors declared a $1.50 per share cash dividend payable on February 28 to the February 9 stockholders of record.
Feb.		28		Paid the dividend declared on January 7.
July		9		Sold 1,680 of its treasury shares at $30 cash per share.
Aug.		27		Sold 2,100 of its treasury shares at $20 cash per share.
Sept.		9		Directors declared a $2 per share cash dividend payable on October 22 to the September 23 stockholders of record.
Oct.		22		Paid the dividend declared on September 9.
Dec.		31		Closed the $64,000 credit balance (from net income) in the Income Summary account to Retained Earnings.

Required:
1. Prepare journal entries to record each of these transactions for 2017.
2. Prepare a statement of retained earnings for the year ended December 31, 2017.
3. Prepare the stockholders’ equity section of the company’s balance sheet as of December 31, 2017.

Answer 1

1)

Date	General journal	Debit	Credit
Jan-02	Treasury Stock, Common	21,000.00
	Cash		21,000.00
Jan-07	Retained Earnings	56,700.00
	Common Dividends Payable		56,700.00
Feb-28	Common Dividends Payable	56,700.00
	Cash		56,700.00
Jul-09	Cash	50,400.00
	Treasury Stock, Common		42,000.00
	Paid in Capital, Treasury Stock		8,400.00
Aug-27	Cash	42,000.00
	Paid in Capital, Treasury Stock	8,400.00
	Retained Earnings	2,100.00
	Treasury Stock, Common		52,500.00
Sep-09	Retained Earnings	83,160.00
	Common Dividends Payable		83,160.00
Oct-22	Common Dividends Payable	83,160.00
	Cash		83,160.00
Dec-31	Income Summary	64,000.00
	Retained Earnings		64,000.00

2)

ALEXANDER CORPORATION
Statemen of Retained Earnings
For Year ended December 31,2017
Retained Earnings,December 31,2016	382,000.00
Add: Net Income	64,000.00
	446,000.00
Less:Cash Dividends Declared	- 139,860.00
Less: Treasury Stock Reissurances	-      2,100.00
Retained Earnings,December 31,2017	304,040.00

3)

ALEXANDER CORPORATION
Stockholders Equity Section of the Balance Sheet
For Year ended December 31,2017
Common Stock- $25 Par Value	1,050,000.00
Paid in Capital in Excess of Par Value,Common Stock	84,000.00
Retained Earnings	304,040.00
Less: Cost of Treasury Stock	-       12,100.00
Total Stockholders Equity	291,940.00