Question

Stockholders' Equity: Transactions and Statement
The stockholders' equity section of Night Corporation's balance sheet at January 1 follows:

Common stock, $8 par value, 300,000 shares authorized, 60,000 shares		480,000
issued, 6,000 shares in treasury
Additional paid-in capital
In excess of par value	720,000
From treasury stock	45,000	765,000
Retained earnings		522,000
		1,767,000
Less: Treasury stock (6,000 shares) at cost		207,000
Total Stockholders’ Equity		1,560,000

The following transactions affecting stockholders’ equity occurred during the year:

Jan.	8	Issued 15,000 shares of previously unissued common stock for $31 cash per share.
Mar.	12	Sold all of the treasury shares for $42 cash per share.
June	30	Declared a five percent stock dividend on all outstanding shares of common stock. The market value of the stock was $37 per share.
July	10	Issued the stock dividend declared on June 30.
Oct.	7	Acquired 2,500 shares of common stock as treasury stock at $39 cash per share.
Dec.	18	Declared a cash dividend of $1.00 per outstanding common share, payable on January 9 to stockholders of record on December 31.

Required
a. Prepare journal entries to record the foregoing transactions.

General Journal
Date	Description	Debit	Credit
Jan.8	AnswerCashCommon StockPaid-in-Capital in Excess of Par ValueTreasury StockPaid-in-Capital from Treasury StockStock DividendsStock Dividend DistributableCash DividendsDividends PayableIncome SummaryRetained earnings	$Answer	$Answer
	AnswerCashCommon StockPaid-in-Capital in Excess of Par ValueTreasury StockPaid-in-Capital from Treasury StockStock DividendsStock Dividend DistributableCash DividendsDividends PayableIncome SummaryRetained earnings	Answer	Answer
	Paid-in-Capital in Excess of Par Value	Answer	Answer
	Issued shares of common stock.
Mar.12	AnswerCashCommon StockPaid-in-Capital in Excess of Par ValueTreasury StockPaid-in-Capital from Treasury StockStock DividendsStock Dividend DistributableCash DividendsDividends PayableIncome SummaryRetained earnings	Answer	Answer
	AnswerCashCommon StockPaid-in-Capital in Excess of Par ValueTreasury StockPaid-in-Capital from Treasury StockStock DividendsStock Dividend DistributableCash DividendsDividends PayableIncome SummaryRetained earnings	Answer	Answer
	Paid-in-Capital from Treasury Stock	Answer	Answer
	Sold shares of treasury stock.
Jun.30	AnswerCashCommon StockPaid-in-Capital in Excess of Par ValueTreasury StockPaid-in-Capital from Treasury StockStock DividendsStock Dividend DistributableCash DividendsDividends PayableIncome SummaryRetained earnings	Answer	Answer
	AnswerCashCommon StockPaid-in-Capital in Excess of Par ValueTreasury StockPaid-in-Capital from Treasury StockStock DividendsStock Dividend DistributableCash DividendsDividends PayableIncome SummaryRetained earnings	Answer	Answer
	Paid-in-Capital in Excess of Par Value	Answer	Answer
	Declared stock dividend.
Jul.10	AnswerCashCommon StockPaid-in-Capital in Excess of Par ValueTreasury StockPaid-in-Capital from Treasury StockStock DividendsStock Dividend DistributableCash DividendsDividends PayableIncome SummaryRetained earnings	Answer	Answer
	AnswerCashCommon StockPaid-in-Capital in Excess of Par ValueTreasury StockPaid-in-Capital from Treasury StockStock DividendsStock Dividend DistributableCash DividendsDividends PayableIncome SummaryRetained earnings	Answer	Answer
	Issued shares of common stock declared as dividend.
Oct.7	AnswerCashCommon StockPaid-in-Capital in Excess of Par ValueTreasury StockPaid-in-Capital from Treasury StockStock DividendsStock Dividend DistributableCash DividendsDividends PayableIncome SummaryRetained earnings	Answer	Answer
	AnswerCashCommon StockPaid-in-Capital in Excess of Par ValueTreasury StockPaid-in-Capital from Treasury StockStock DividendsStock Dividend DistributableCash DividendsDividends PayableIncome SummaryRetained earnings	Answer	Answer
	Purchased shares of common stock for treasury.
Dec.18	AnswerCashCommon StockPaid-in-Capital in Excess of Par ValueTreasury StockPaid-in-Capital from Treasury StockStock DividendsStock Dividend DistributableCash DividendsDividends PayableIncome SummaryRetained earnings	Answer	Answer
	AnswerCashCommon StockPaid-in-Capital in Excess of Par ValueTreasury StockPaid-in-Capital from Treasury StockStock DividendsStock Dividend DistributableCash DividendsDividends PayableIncome SummaryRetained earnings	Answer	Answer
	Declared cash dividend.
Dec.31	AnswerCashCommon StockPaid-in-Capital in Excess of Par ValueTreasury StockPaid-in-Capital from Treasury StockStock DividendsStock Dividend DistributableCash DividendsDividends PayableIncome SummaryRetained earnings	Answer	Answer
	AnswerCashCommon StockPaid-in-Capital in Excess of Par ValueTreasury StockPaid-in-Capital from Treasury StockStock DividendsStock Dividend DistributableCash DividendsDividends PayableIncome SummaryRetained earnings	Answer	Answer
	To close the income summary account.
Dec.31	AnswerCashCommon StockPaid-in-Capital in Excess of Par ValueTreasury StockPaid-in-Capital from Treasury StockStock DividendsStock Dividend DistributableCash DividendsDividends PayableIncome SummaryRetained earnings	Answer	Answer
	Stock dividends	Answer	Answer
	AnswerCashCommon StockPaid-in-Capital in Excess of Par ValueTreasury StockPaid-in-Capital from Treasury StockStock DividendsStock Dividend DistributableCash DividendsDividends PayableIncome SummaryRetained earnings	Answer	Answer
	To close the dividend accounts.

b. Prepare a statement of stockholders’ equity. Net income for the year is $170,500.
Use negative signs with your answers when appropriate (reduction to retained earnings, acquired treasury stock and treasury stock balances).

Night Corporation Statement of Stockholders' Equity For Year Ended December 31
		Common Stock	Paid-in-Capital in Excess of Par	Paid-in-Capital from Treasury Stock	Retained Earnings	Treasury Stock	Total
Balance, January 1		$Answer	$Answer	$Answer	$Answer	$Answer	$Answer
Answer	Common shares issued	Answer	Answer	Answer	Answer	Answer	Answer
Answer	Treasury shares sold	Answer	Answer	Answer	Answer	Answer	Answer
Stock Dividends Issued		Answer	Answer	Answer	Answer	Answer	Answer
Answer	Treasury shares acquired	Answer	Answer	Answer	Answer	Answer	Answer
Cash Dividends Declared		Answer	Answer	Answer	Answer	Answer	Answer
Net Income		Answer	Answer	Answer	Answer	Answer	Answer
Balance, December 31		$Answer	$Answer	$Answer	$Answer	$Answer	$Answer

Answer 1

Credit Debit 465,000 Date Account Title & Explanation 8-Jan Cash Common Stock Paid in Capital in Excess of Par Value (To reord issue of Common Stock) 120,000 345,000 252000 12-Mar Cash Treasury Stock Paid-in-Capital from Treasury Stock (To record sale of Treasury stock) 207000 45000 32 149,850 30-Jun Stock Dividends (60000+6000+15000)*5%*37 Stock Dividends Distributable (60000+6000+15000)*5%*8 Paid-In Capital in Excess of Par Value (To record issue of stock dvidend) 32,400 117,450 32,400 10-Jul Stock Dividends Distributable Common Stock (To record issue of common stock dvidend) 32,400 97,500 7-Oct Treasury Stock Cash (To record issue of treasury stock) 42 43 97,500 44

170,500 49 50 51 31-Dec Income Summary Retained Earnings (To record transfer of net income) 170,500 52 232,400 31-Dec Retained Earnings Stock Dividends Cash Dividends (To record transfer of dividends) 149,850 82,550 Night Corporation Statement of Stockholders' Equity For Year Ended December 31 Common Paid-in-Capital Paid-in-Capital Retained Treasury Total Stock in Excess of Par from Earnings Stock Treasury Stock 480000 720000 45000 522000 -207000 120,000 345,000 0 0 0 0 45000 0 207000 32,400 117,450 (149,850) 0 0 0 (97,500) (82,550) 0 170,500 632400 1182450 90000 460,100 -97500 Balance, January 1 Add Common shares issued Add Treasury shares sold Stock Dividends Issued Less Treasury shares acquired Cash Dividends Declared Net Income Balance, December 31 1560000 465000 102150 O -97500 -82550 170500 2267450