Question

PRUULI LO2, 3.5 36. Recording and Reporting Equity Camp Corporation had the following balances in its stockholders' equity at January 1: Common stock, $2 par value, 450,000 shares issued $ 900,000 Additional paid-in capital 1,200,000 Retained earnings 2,225,000 Treasury stock, at cost, 8,000 shares (48,000) During the year, Camp Corporation had the follow- ing transactions related to stockholders' equity: Mar. 1 Issued 200,000 shares of common stock for cash at $8 per share. July 1 Declared a 10% stock dividend, payable August 1. The stock was trading at $7 per share on July 1. Aug. 15 Declared a $0.50 per share cash dividend to stockholders of record on September 1, payable September 15. Oct. 1 Bought back 6,000 shares of common stock for $45,000.

Answer 1

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Workings
Common Stock	Number	Par Value	Amount $	Note
Opening Balance	450,000.00	2.00	900,000.00	A
Issued on March 1	200,000.00	2.00	400,000.00	B
Total on July 1	650,000.00		1,300,000.00	C=A+B
Stock dividend at 10%	65,000.00	2.00	130,000.00	D=C*10%
Closing on Dec 31	715,000.00		1,430,000.00	E=C+D
Additional paid in capital	Number	Value	Amount $	Note
Opening Balance			120,000.00	F
Issued on March 1 (8-2)	200,000.00	6.00	1,200,000.00	G
Stock dividend at 10% (7-2)	65,000.00	5.00	325,000.00	See D
Closing on Dec 31			1,525,000.00	H=F+G+D
Cash Dividend Payable	Amount $
Closing number of shares on Sep 30	715,000.00			See E
Dividend per share	0.50			I
Dividend Payable	357,500.00			J=E*I
Treasury Shares	Number	Amount $
Opening Balance	8,000.00	48,000.00
Add: Bought during the year	6,000.00	45,000.00
Closing on Dec 31	14,000.00	93,000.00		K

Camp Corporation
Answer a	Journal Entry
Date	Account	Debit $	Credit $
1-Mar	Cash	1,600,000.00
	Common Stock		400,000.00	See Note A
	Additional paid in capital		1,200,000.00	See Note G
1-Jul	Retained Earnings	455,000.00
	Common Stock		130,000.00	See Note D of Common Stock
	Additional paid in capital		325,000.00	See Note D of Additional paid in capital
15-Aug	Retained Earnings	357,500.00		See Note J
	Dividend Payable		357,500.00	See Note J
1-Oct	Treasury Stock	45,000.00
	Cash		45,000.00

Answer b
Retained Earnings Account
Date	Account	Debit $	Date	Account	Credit $
1-Jul	Common Stock	130,000.00	1-Jan	Opening Balance	2,225,000.00
1-Jul	Additional paid in capital	325,000.00	31-Dec	Net Income	520,000.00
15-Aug	Dividend Payable	357,500.00
31-Dec	Closing Balance	1,932,500.00
		2,745,000.00
			1-Jan	Opening Balance	1,932,500.00

Answer c
Stockholder's Equity
Paid-In Capital:	Amount $	Amount $
Common Stock, $ 2 par
715,000 shares issued	1,430,000.00
Additional paid in capital	1,525,000.00	2,955,000.00
Total Paid-In Capital		2,955,000.00
Retained Earnings		1,932,500.00
Total		4,887,500.00
Less: Treasury Stock-Common
(14,000 shares)		93,000.00
Total Stockholder's Equity		4,794,500.00

Answer d
Earnings Per share		Amount $
Net Income		520,000.00
Number of shares outstanding on Dec 31		715,000.00
Earnings Per share		0.73