Question

3. The stockholders’ equity of Rayborn Corporation at January 1 of the current year appears below

Common Stock, $5 Par Value, 400,000 shares authorized;

160,000 shares issued and outstanding $800,000

Premium on Common Stock   920,000

Retained Earnings   513,000     

During the year, the following transactions occurred:

June 7 Declared a 10% stock dividend; market value of the common stock was $10 per share.

28. Issued the stock dividend declared on June 7.

Dec 5 Declared a cash dividend of $1.25 per share.

26. Paid the cash dividend declared on December 5.

31. Closed the net income of $412,000 from the Income Summary account to Retained Earnings.

REQUIRED:

1. Prepare general journal entries to record the foregoing transactions.
2. Prepare a Statement of Retained Earnings

Answer 1

A) Journal Entries Debit $ 160,000 Date Account title and explaination Jun-07 Retained earnings Stock dividend distributable Paid in capital excess of par (To record stock dividend declared) Credit (160000*10%*10) $ 80,000 (16000*5) $ 80,000 (16000*5) $ 80,000 Jun-07 Stock dividend distributable Common stock (To record issuance of common shares as stock dividend) $ 80.000 $ 220.000 (160000+16000) *1.25 Dec-05 Retained earnings Dividends payable (To record cash dividend declared) $220,000 $ 220,000 Dec-05 Dividends payable Cash (To record cash dividend paid) $220.000 $ 412,000 Dec-31 Income summary Retained earnings (To record Net Income transferred to retained earnings) $412,000 B) Statement of retained earnings Rayborn Corporation Beginning Retained earnings Add: Net income less: Stock dividend less: Cash dividend Ending Retained earnings $513,000 $ 412,000 $(160,000 $(220,000) $545,000