Morrow Enterprises Inc manufactures bathroom fixtures The st

Morrow Enterprises Inc. manufactures bathroom fixtures. The stockholders’ equity ac- counts of Morrow Enterprises Inc., with balances on January 1, 2016, are as follows:

Common Stock, $20 stated value (500,000 shares authorized, 375,000 shares issued) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Paid-In Capital in Excess of Stated Value—Common Stock . . . . . . . . . . . . Retained Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Treasury Stock (25,000 shares, at cost) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The following selected transactions occurred during the year:

$ 7,500,000 825,000 33,600,000 450,000

Jan. 22.

Apr. 10. June 6. July 5.

Aug. 15. Nov. 23. Dec. 28.

Paid cash dividends of $0.08 per share on the common stock. The dividend had been properly recorded when declared on December 1 of the preceding fiscal year for $28,000.

Issued 75,000 shares of common stock for $24 per share. Sold all of the treasury stock for $26 per share.

Declared a 4% stock dividend on common stock, to be capitalized at the mar- ket price of the stock, which is $25 per share.

Issued the certificates for the dividend declared on July 5. Purchased 30,000 shares of treasury stock for $19 per share. Declared a $0.10-per-share dividend on common stock.

31. Closed the credit balance of the income summary account, $1,125,000. 31. Closed the two dividends accounts to Retained Earnings

Instructions

1. Enter the January 1 balances in T accounts for the stockholders’ equity accounts listed. Also prepare T accounts for the following: Paid-In Capital from Sale of Treasury Stock; Stock Dividends Distributable; Stock Dividends; Cash Dividends.

2. Journalize the entries to record the transactions, and post to the eight selected accounts. 3. Prepare a retained earnings statement for the year ended December 31, 2016. 4. Prepare the Stockholders’ Equity section of the December 31, 2016, balance sheet.

Solution

Common Stock Jan-1 Bal 7500000 Apr-10 1500000 Aug-15 360000 Dec-31 9360000 9360000 9360000 Treasury Stock Jan-1 Balance 450000 Jun-06 450000 Nov-23 570000 Dec 31 Bal 570000 1020000 1020000 Paid in Capital in excess of stated value Jan 1 Bal 825000 Apr-10 300000 Jul-05 90000 Dec-31 1215000 1215000 1215000 Paid in Capital fom treasury Stock Jun-06 200000 Dec-31 200000 200000 200000 Stock Dividend Distributable Aug-15 360000 Jul-05 360000 360000 360000 Stock Dividend Jul-05 450000 Dec-31 450000 450000 450000 Cash Dividend Dec-28 43800 Dec-31 43800 43800 43800 Retained Earning Dec-31 493800 Jan-01 33600000 Dec-31 34231200 Dec-31 1125000 34725000 34725000 Journal Entry Date Particulare Debit Credit Jan-22 Dividend Distributable 28000 To Cash 28000 ( to record cash payment of dividend declared earlier.) Apr-10 Cash 1800000 Common Stock 1500000 Paid in capital in excess of stated value 300000 ( To record issue of common stock at 24) Jun-06 Cash 650000 Treasury Stock 450000 Paid in capital from Treasury stock 200000 ( To record sale of treasury stock at 26) Jul-05 Stock Dividend 450000 Dividend Distributable 360000 Paid in Capital in excess of Stated Value 90000 ( to record dividend declred ) Aug-15 Stock Dividend Distributable 360000 Common Stock 360000 (To record issuence of certificate) Nov-23 Treasury Stock 570000 To Cash 570000 ( to record purchase of treasury Stock) Dec-28 Cash Dividend 43800 Dividend Distributable 43800 ( To record Declaration of dividend on common stock) Dec-31 Retained Earning 493800 To Cash Dividen 43800 To Stock Dividend 450000 ( to close the dividend accounts to retained earning) Dec-31 Income Summary 1125000 To retained Earning 1125000 ( Closed the credit balance of the income summary account, $1,125,000 ) Shareholder\'s equity Account as at Dec-31 Paid-in Capital Common Stock, $20 stated value (500,000 shares authorized, 468000 shares issued) 9360000 Paid-In Capital in Excess of Stated Value—Common Stock 1215000 Retained Earnings 34231200 44806200 Less Treasury Stock (30,000 shares, at cost) 570000 Painin Capital from Treasury stock 200000 Total Shareholder,s Equity 44036200 Retained Earnings as at Dec-31 Retained earnings on Jan-1 33600000 Net Income 1125000 Less Cash Dividend 43800 Stock Dividend 450000 Retainind Earnings As at 31 Dec 34231200 Note- Best effort have been made to answer the question correctly, in case of any discrepencies kindly comment and i will try to resolve it as soon as possible. Please provide positive feedback.