Question

Comprehensive

Instructions

Chart of Accounts

Labels and Amount Descriptions

General Journal

Balance Sheet

Instructions

Included in the December 31, 2015, Jacobi Company balance sheet was the following shareholders’ equity section:

Jacobi Company

Balance Sheet (Shareholders' Equity)

December 31, 2015

1	Contributed Capital:
2	Preferred stock, 6%, $100 par	$200,000.00
3	Additional paid-in capital on preferred stock	12,000.00	$212,000.00
4	Common stock, $5 par	$150,000.00
5	Additional paid-in capital on common stock	240,000.00	390,000.00
6	Total contributed capital		$602,000.00
7	Retained earnings		627,000.00
8	Accumulated other comprehensive income (loss):
9	Unrealized decrease in value of available-for-sale securities		(41,000.00)
10	Total contributed capital, retained earnings, and accumulated other comprehensive income		$1,188,000.00
11	Less: Treasury stock (1,000 shares of common stock at cost, acquired on 2/3/2015)		(20,000.00)
12	Total Shareholders’ Equity		$1,168,000.00

The company engaged in the following stock transactions during 2016:

Jan.	4	Paid the semiannual dividend on the outstanding preferred stock and a $1.60 per share annual dividend on the outstanding common stock. These dividends had been declared on December 1, 2015.
	5	Issued 500 shares of preferred stock at $110 per share.
	22	Issued 4,000 shares of common stock at $23 per share.
Apr.	2	Reissued 700 shares of treasury stock at $24 per share.
May	14	Declared a 10% stock dividend on the outstanding common stock, payable on June 29. The common stock is currently selling for $25 per share.
Jun.	4	Declared the semiannual cash dividend on the outstanding preferred stock, payable on July 5.
	29	Issued the stock dividend declared on May 14.
Jul.	5	Paid the cash dividend declared on June 4.
	20	Split the common stock 2-for-1 and reduced the par value to $2.50 per share.
Aug.	3	Declared a property dividend, payable to common shareholders on September 14. The dividend consists of an available-for-sale investment in 50 Drot Company bonds. The bonds had been acquired for $45,000, but have a carrying value of $30,000. The bonds are currently selling for $20,000.
Sep.	14	Paid the property dividend declared on August 3.
Dec.	3	Declared the semiannual cash dividend on the outstanding preferred stock and a $0.90 per share annual dividend on the outstanding common stock.

Required:

1.	Prepare journal entries to record the preceding transactions.
2.	Prepare the December 31, 2016, shareholders’ equity section (assume that 2016 net income was $270,000).

Chart of Accounts

CHART OF ACCOUNTS
Jacobi Company
General Ledger
ASSETS 111 Cash 115 Investment in Stock 119 Allowance for Change in Fair Value of Investment 121 Accounts Receivable 141 Inventory 152 Prepaid Insurance 181 Equipment 198 Accumulated Depreciation LIABILITIES 211 Accounts Payable 231 Salaries Payable 250 Unearned Revenue 261 Income Taxes Payable 272 Property Dividends Payable 273 Dividends Payable: Preferred 274 Dividends Payable: Common EQUITY 305 Preferred Stock 311 Common Stock 315 Common Stock to be Distributed 321 Additional Paid-in Capital on Preferred Stock 322 Additional Paid-in Capital on Common Stock 323 Additional Paid-in Capital from Treasury Stock 324 Additional Paid-in Capital from Stock Dividend 329 Unrealized Decrease in Value of Available-for-Sale Securities 331 Retained Earnings 335 Treasury Stock	REVENUE 411 Sales Revenue EXPENSES 500 Cost of Goods Sold 511 Insurance Expense 512 Utilities Expense 521 Salaries Expense 532 Bad Debt Expense 540 Interest Expense 541 Depreciation Expense 559 Miscellaneous Expenses 910 Income Tax Expense 913 Loss on Disposal of Investment

Labels and Amount Descriptions

Labels
Contributed Capital
Accumulated Other Comprehensive Income (Loss)
Amount Descriptions
Total Contributed Capital
Total Contributed Capital, Retained Earnings, and Accumulated Other Comprehensive Income
Total Shareholders’ Equity

General Journal

Prepare journal entries to record the stock transactions . Additional information

PAGE 1PAGE 2

GENERAL JOURNAL

	DATE	ACCOUNT TITLE	POST. REF.	DEBIT	CREDIT
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19

Balance Sheet

Prepare the December 31, 2016, shareholders’ equity section (assume that 2016 net income was $270,000). Additional Instructions

Jacobi Company

Partial Balance Sheet

December 31, 2016

1	Shareholders’ Equity
2
3
4
5
6
7
8
9
10
11
12
13
14
15

Answer 1

1.         2016

Jan.	4   Dividends Payable: Preferred
	($6 x ½ x 2,000)	6,000
	Dividends Payable: Common*	46,400
	Cash	52,400

*30,000 - 1,000 in treasury = 29,000 x $1.60 = $46,400

Jan.	5   Cash (500 x $110)	55,000
				Preferred Stock, $100 Par	50,000
				Premium on Preferred Stock	5,000
	23   Cash (4,000 x $23)	92,000
				Common Stock, $5 Par	20,000
				Premium on Common Stock	72,000
Apr.	2   Cash (700 x $24)	16,800
				Treasury Stock (700 x $20
				per share cost)	14,000
			Additional Paid-in Capital
				from Treasury Stock	2,800
May	14	Retained Earnings*	84,250
				Common Stock To Be Distributed
						(3,370 x $5)	16,850
				Additional Paid-in Capital from
						Stock Dividend	67,400
		*34,000	shares issued
				- 300		treasury shares
			33,700	shares outstanding
			x	0.10	stock dividend %
				3,370 shares in stock dividend
			x	$25 current market price
		$84,250 reduction in retained earnings
June	4   Retained Earnings [(2,000 + 500) x
				$6 x ½ year]	7,500
				Dividends Payable: Preferred	7,500
	29   Common Stock To Be Distributed	16,850
				Common Stock, $5 Par	16,850
July	5	Dividends Payable: Preferred	7,500
				Cash	7,500

20          Memorandum entry: On this date the common stock was split two for one and the par value was reduced from $5 to $2.50 per share. The number of issued common shares increased from 37,370* to 74,740. The number of treasury shares increased from 300 to 600 and the cost decreased to $10 per share.

*37,370 = 34,000 issued + 3,370 stock dividend

Aug.	3	Loss on Disposal of Investment
		[5,000 x ($9 - 4)]	25,000
		Unrealized Decrease in Value of
		Securities Available-for-Sale
		[5,000 x ($9 - 6)]	15,000
		Allowance for Change in Value of
		Investment [5,000 x ($6 - 4)]	10,000
		Retained Earnings (5,000 x $4)	20,000
		Property Dividend Payable	20,000
Sept.	14	Property Dividend Payable	20,000
		Allowance for Change in Value of
		Investment	25,000
		Investment in Drot Company Stock	45,000
Dec .	3	Retained Earnings*	74,226
		Dividends Payable: Preferred	7,500
		Dividends Payable: Common	66,726
*Preferred:	2,500 x $6 x ½ year = $7,500
Common:	(74,740 - 600 in treasury) x $0.90 = $66,726

2.	JACOBI COMPANY
	Stockholders' Equity
	December 31, 2016
	Preferred stock (6%, $100 par, 2,500 shares
	issued and outstanding)	$250,000
	Premium on preferred stock		17,000a     $	267,000
	Common stock ($2.50 par, 74,740 shares issued
	of which 600 are in the corporate treasury)	$186,850		498,850
	Premium on common stock		312,000b
	Additional paid-in capital from treasury stock					2,800
	Additional paid-in capital from stock dividend					67,400
	Total contributed capital		$	836,050
	Retained earnings (restricted in the amount of
	$6,000, the cost of the treasury shares)					711,024d
	Accumulated other comprehensive income (loss)
	Unrealized decrease in value of					(26,000)c
	available-for-sale securities
	Contributed capital, retained earnings, and
	accumulated other comprehensive income	$1,521,074
	Less:  Treasury stock (600 common shares at					(6,000)
	$10 per share)
	Total stockholders' equity		$1,515,074

a$17,000 = $12,000 + $5,000 b$312,000 = $240,000 + $72,000 c$26,000 = $41,000 - $15,000

d$711,024 = $627,000 + $270,000 - $84,250 - $7,500 - $20,000 - $74,226