Morrow Enterprises Inc manufactures bathroom fixtures Morrow

Morrow Enterprises Inc. manufactures bathroom fixtures. Morrow Enterprises’ stockholders’ equity accounts, with balances on January 1, 20Y6, are as follows:

The following selected transactions occurred during the year:

Required:

1. The January 1 balances have been entered in T accounts for the stockholders\' equity accounts. Record the above transactions in the T accounts and provide the December 31 balance where appropriate. If required, round to one decimal place.

2. Journalize the entries to record the transactions. For a compound transaction, if an amount box does not require an entry, leave it blank.

Jan. 22. Paid cash dividends of $0.12 per share on the common stock. The dividend had been properly recorded when declared on December 1 of the preceding fiscal year for $56,160.

Apr. 10. Issued 100,000 shares of common stock for $1,800,000.

June 6. Sold all of the treasury stock for $18 per share.

July 5. Declared a 4% stock dividend on common stock, to be capitalized at the market price of the stock, which is $20 per share.

Aug. 15. Issued shares of stock for the dividend declared on July 5.

Nov. 23. Purchased 33,000 shares of treasury stock for $20 per share.

Dec. 28. Declared a $0.15-per-share dividend on common stock.

Dec. 31. Closed the credit balance of the income summary account, $12,272,000.

Dec. 31. Closed the two dividends accounts to Retained Earnings.

3. Prepare a retained earnings statement for the year ended December 31, 20Y6.

4. Prepare the Stockholders\' Equity section of the December 31, 20Y6, balance sheet.

Common Stock, $10 stated value (800,000 shares authorized, 520,000 shares issued)	$5,200,000
Paid-In Capital in Excess of Stated Value-Common Stock	1,000,000
Retained Earnings	11,800,000
Treasury Stock (52,000 shares, at cost)	780,000

Solution

1 Common stock Particulars Debit Particulars Credit Jan 1. Bal. 5200000 Apr 10. Cash 1000000 Aug 15.stock dividend distributable 248000 Dec 31. Balance 6448000 6448000 6448000 Paid-In Capital in Excess of Stated Value-Common Stock Particulars Debit Particulars Credit Jan 1. Bal. 1000000 Apr 10. Cash 800000 Dec 31. Balance 2048000 July 5. Stock dividend 248000 2048000 2048000 Retained earnings Particulars Debit Particulars Credit Dec 31. Stock dividends 496000 Jan 1. Bal. 11800000 Dec 31. cash dividends 91770 Dec 31.Income summary 12272000 Dec 31.Bal. 23484230 24072000 24072000 Treasury stock Particulars Debit Particulars Credit Jan 1. Bal. 780000 June 6. Cash 780000 Nov 23.cash 660000 Dec 31.Bal. 660000 1440000 1440000 Paid-In Capital from Sale of Treasury Stock Particulars Debit Particulars Credit Dec 31.Bal. 156000 June 6. Cash 156000 156000 156000 Stock Dividends Distributable Particulars Debit Particulars Credit Aug 15.Common stock 248000 July 5. Stock dividend 248000 248000 248000 Stock Dividends Particulars Debit Particulars Credit July 5.Paid-In Capital in Excess of Stated Value-Common Stock 248000 Dec 31. Retained earnings 248000 248000 248000 Cash Dividends Particulars Debit Particulars Credit Dec 28. cash dividend payable 91770 Dec 31. Retained earnings 91770 91770 91770 2 Date Account Debit Credit Jan 22. Cash dividend payable 56160 Cash 56160 (Paid cash dividends) Apr 10. Cash 1800000 Common stock (100000*10) 1000000 Paid-In Capital in Excess of Stated Value-Common Stock 800000 (balancing figure) ( Issued 100,000 shares) June 6. Cash (52000*18) 936000 Treasury stock 780000 Paid-In Capital from Sale of Treasury Stock 156000 (Sold all of the treasury stock) July 5. Stock dividends (Note:1) 496000 Stock dividends distributable 248000 Paid-In Capital in Excess of Stated Value-Common Stock 248000 (Declared a 4% Stock dividend on common stock) Aug 15. Stock dividends distributable 248000 Common stock 248000 (Issued shares of stock for the dividend declared on July 5) Nov 23. Treasury stock (33000*20) 660000 Cash 660000 ( Purchased 33,000 shares of treasury stock) Dec 28. Cash dividend (Note:2) 91770 Cash dividend payable 91770 (Declared a $0.15-per-share dividend) Dec 31. Income summary 12272000 Retained earnings 12272000 (Closed the credit balance of the income summary account) Dec 31. Retained earnings 587770 Stock dividends 496000 Cash dividend 91770 (Closed the two dividends accounts) Note:1-Stock dividend on July 5. Common stock shares outstanding on July 5: Beginnning balance Common stock 520000 Trasury stock -52000 468000 Shares issued 100000 Treasry stock sold 52000 Common stock shares outstanding on July 5 620000 Stock dividend=620000*4%*20=$ 496000 Stock dividend distributable @ par value=620000*4%*10=$ 248000 Note:2- Cash dividend payable Common stock shares outstanding on Dec 28: Common stock shares outstanding on July 5 620000 Stock dividend issued (620000*4%) 24800 Trasury stock purchased -33000 Common stock shares outstanding on Dec 28 611800 Cash dividend=611800*0.15=$ 91770 3 Retained earnings statement Beginning balance 11800000 Add: net income 12272000 24072000 Less: Dividends declared Stock dividend 496000 Cash dividend 91770 587770 Ending balance 23484230 4 Balance sheet Shareholder\'s equity section $ Paid in capital: Common stock,$10 par value,800000 shares authorized,644800 shares issued and 611800 shares outstanding 6448000 Paid-In Capital in Excess of Stated Value-Common Stock 2048000 Paid-In Capital from Sale of Treasury Stock 156000 Total Paid in capital 8652000 Retained earnings 613000 9265000 Less: Treasury stock (33000 shares) 660000 Total shareholder\'s equity 8605000