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Morrow Enterprises Inc. manufactures bathroom fixtures. The stockholders’ equity accounts of Morrow Enterprises Inc., with balances on January 1, 20Y5, are as follows: Common stock, $20 stated value (500,000 shares authorized, 367,000 shares issued) $7,340,000 Paid-In Capital in Excess of Stated Value—Common Stock 844,100 Retained Earnings 33,388,000 Treasury Stock (22,800 shares, at a cost of $17 per share) 387,600 The following selected transactions occurred during the year: Jan. 22 Paid cash dividends of $0.09 per share on the common stock. The dividend had been properly recorded when declared on December 1 of the preceding fiscal year for $30,978. Apr. 10 Issued 71,000 shares of common stock for $23 per share. Jun. 6 Sold all of the treasury stock for $27 per share. Jul. 5 Declared a 3% stock dividend on common stock, to be capitalized at the market price of the stock, which is $26 per share. Aug. 15 Issued the certificates for the dividend declared on July 5. Nov. 23 Purchased 28,000 shares of treasury stock for $18 per share. Dec. 28 Declared a $0.09-per-share dividend on common stock. 31 Closed the two dividends accounts to Retained Earnings. Required: A. Enter the January 1 balances in T accounts for the stockholders’ equity accounts listed. B. Journalize the entries to record the transactions, and post to the eight selected accounts. No post ref is required in the journal. Refer to the Chart of Accounts for exact wording of account titles. C. Prepare a retained earnings statement for the year ended December 31, 20Y5. Assume that Morrow Enterprises had net income for the year ended December 31, 20Y5, of $1,131,500. For those boxes in which you must enter subtractive or negative numbers use a minus sign. The word "Less" is not required.* D. Prepare the Stockholders’ Equity section of the December 31, 20Y5, balance sheet. For those boxes in which you must enter subtractive or negative numbers use a minus sign.* * Refer to the list of Amount Descriptions provided for the exact wording of the answer choices for text entries

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obasola1

Answer:

A) Entering the January 1 Balances in T-Accounts for ther Stockholders Equity Accounts Listed:

                                               Common Stock

                Jan. 1 Bal.                         $7,340,000

                  Apr. 10                                 $1,420,000

                   Aug. 15                         $262,800

                   Dec. 31 Bal                         $9,022,800

          Paid-In Capital in Excess of Stated Value - Common Stock

                         Jan. 1 Bal.            $844,100

                            Apr. 10            $213,000

                             July 5             $78,840

                         Dec. 31 Bal            $1,135,940

                                                Retained Earnings

     Dec 31                $379,723     Jan. 1 Bal.     $33,388,000

                                                            Dec 31    $1,131,500

                                                           Dec. 31 Bal     $34,519,500

                                                  Treasury Stock

Jan. 1 Bal.         $341,640           June 6 $341,640

Nov 23                 $504,000  

Dec. 31 Bal         $504,000  

                  Paid-In Capital from Sale of Treasury Stock

                                 June 6                 $228,000

                                   Stock Dividends Distributable

Aug 15                     $262,800        July 5 $262,800

                                    Stock Dividends

July 5                     $341,640        Dec 31 $341,640

                                    Cash Dividends

Dec 28                    $38,083              Dec 31                         $38,083

B) Preparing the Journal Entries to Record the Transactions:

Date             General Journal                     Debit              Credit

Jan 22 Cash Dividends Payable

           [(367,000 shares - 22,800 shares) * $0.09]                       $30,978  

                                 Cash                                                         $30,978

-Look below for more explanation

Explanation:

A) Entering the January 1 Balances in T-Accounts for ther Stockholders Equity Accounts Listed:

                                               Common Stock

                Jan. 1 Bal.                         $7,340,000

                  Apr. 10                                 $1,420,000

                   Aug. 15                         $262,800

                   Dec. 31 Bal                         $9,022,800

          Paid-In Capital in Excess of Stated Value - Common Stock

                         Jan. 1 Bal.            $844,100

                            Apr. 10            $213,000

                             July 5             $78,840

                         Dec. 31 Bal            $1,135,940

                                                Retained Earnings

     Dec 31                $379,723     Jan. 1 Bal.     $33,388,000

                                                            Dec 31    $1,131,500

                                                           Dec. 31 Bal     $34,519,500

                                                  Treasury Stock

Jan. 1 Bal.         $341,640           June 6 $341,640

Nov 23                 $504,000  

Dec. 31 Bal         $504,000  

                  Paid-In Capital from Sale of Treasury Stock

                                 June 6                 $228,000

                                   Stock Dividends Distributable

Aug 15                     $262,800        July 5 $262,800

                                    Stock Dividends

July 5                     $341,640        Dec 31 $341,640

                                    Cash Dividends

Dec 28                    $38,083              Dec 31                         $38,083

B) Preparing the Journal Entries to Record the Transactions:

Date             General Journal                     Debit              Credit

Jan 22 Cash Dividends Payable

           [(367,000 shares - 22,800 shares) * $0.09]                       $30,978  

                                 Cash                                                         $30,978

Apr 10            Cash (71,000 shares * $23)        $1,633,000  

                            Common Stock                                             $1,420,000

                       (71,000 shares * $20)

                  Paid-In Capital in Excess                                               $213,000

            of Stated Value - Common Stock  

                  [71,000 shares à ($23 - $20)]

June 6     Cash (22,800 shares * $27)                $615,600  

                   Treasury Stock (22,800 shares * $17)                        $387,600                                        

                        Paid-In Capital from Sale of

                 Treasury Stock [22,800 shares * ($27 - $17)]     $228,000

July 5 Stock Dividends [(367,000                     $341,640

              shares + 71,000 shares) * 3% * $26]

Stock Dividends Distributable (13,140 shares * $20)                 $262,800

                   Paid-In Capital in Excess of Stated

            Value Common Stock [13,140 shares * ($26 - $20)]  $78,840

Aug 15                 Stock Dividends Distributable $262,800  

                                          Common Stock                                $262,800

Nov 23         Treasury Stock (28,000 shares * $18)    $504,000  

                                            Cash                                              $504,000

Dec 28           Cash Dividends [(367,000 shares

                         + 71,000 shares + 13,140                   $38,083  

                         shares - 28,000 shares) * $0.09]

                                 Cash Dividends Payable  $38,083

Dec 31                     Income Summary               $1,131,500  

                                         Retained Earnings                        $1,131,500

Dec 31                        Retained Earnings               $379,723  

                                         Stock Dividends                                $341,640

                                             Cash Dividends                         $38,083

C) Preparing a Retained Earnings Statement for the Year Ended December 31, 2015:

                                 MORROW ENTERPRISES INC.

                                 Retained Earnings Statement

                           For the Year Ended December 31, 2015

Retained earnings, January 1, 2015                                   $33,388,000

         Net Income                                             $1,131,500  

          Less: Cash dividends                          ($38,083)  

Stock dividends                                               ($341,640)  

Increase in retained earnings                                                   $751,777

Retained earnings, December 31, 2015                             $34,139,777

D) Preparing the Stockholder's Equity Section of the December 31, 2015, Balance Sheet:

                                          Stockholdersâ Equity

Paid-in capital:  

Common stock, $20 stated value

(500,000 shares authorized, 451,140                 $9,022,800

shares issued)

Excess of issue price over stated value         $1,135,940  

From sale of treasury stock                              $228,000  

Total paid-in capital                                                             $10,386,740

Retained earnings                                                                     $34,139,777

Total                                                                                    $44,526,517

Deduct treasury stock 28,000 shares at cost)  $504,000

Total stockholdersâ equity  $44,022,517

anthougo

A. The entry of the January 1 balances in T-accounts of Morrow Enterprises Inc. are as follows:

Common Stock

Date         Account Titles            Debit         Credit

Jan. 1       Balance                                   $7,340,000

Additional Paid-in Capital

Date         Account Titles            Debit         Credit

Jan. 1       Balance                                      $844,100

Retained Earnings

Date         Account Titles            Debit         Credit

Jan. 1       Balance                                   $33,388,000

Treasury Stock

Date         Account Titles            Debit         Credit

Jan. 1       Balance               $387,600

B. Journal Entries:

Jan. 22 Debit Dividend Payable $30,978

Credit Cash $30,978

Apr. 10 Debit Cash $1,775,000

Credit Common Stock $1,420,000

Credit Additional Paid-in Capital $355,000

Issued, 71,000 shares at $25 per share

Jun. 6 Debit Cash $615,600

Credit Treasury Stock $387,600

Credit Additional Paid-in Capital $228,000

Jul. 5 Debit Stock Dividend $11,388,000

Credit Dividend Distributable $11,388,000

Aug. 15 Debit Dividend Distributable $11,388,000

Credit Common Stock $8,760,000

Credit Additional Paid-in Capital $2,628,000

Nov. 23 Debit Treasury Stock $504,000

Credit Cash $504,000

Dec. 28 Debit Dividend Expense $36,900

Credit Dividend Payable $36,900

Dec. 31 Debit Retained Earnings $11,424,900

Credit Dividend Expense $36,900

Credit Stock Dividend $11,388,000

T-accounts:

Common Stock

Date         Account Titles            Debit         Credit

Jan. 1       Balance                                   $7,340,000

Apr. 10     Cash                                        $1,420,000

Aug. 15    Dividend Distributable          $8,760,000

Dec. 31    Balance         $17,520,000

Totals                            $17,520,000   $17,520,000

Additional Paid-in Capital

Date         Account Titles            Debit         Credit

Jan. 1       Balance                                      $844,100

Apr. 10    Cash                                          $355,000

Jun. 6     Cash                                          $228,000

Aug. 15   Dividend Distributable         $2,628,000

Dec. 31    Balance           $4,055,100

Totals                              $4,055,100   $4,055,100

Retained Earnings

Date         Account Titles            Debit         Credit

Jan. 1       Balance                                   $33,388,000

Dec. 31    Cash Dividend        $36,900

Dec. 31    Stock Dividend $11,388,000

Dec. 31    Balance           $23,094,600

Dec. 31    Income Summary                       $1,131,500

Totals                               $34,519,500  $34,519,500  

Treasury Stock

Date         Account Titles            Debit         Credit

Jan. 1       Balance                $387,600

Jun. 6      Cash                                          $387,600

Nov. 23   Cash                    $504,000

Dec. 31    Balance                                    $504,000

Totals                                   $891,600     $891,600

C. Retained Earnings Statement

For the year ended December 31, 20Y5

January 1, 20Y5               $33,388,000

Income summary                  $1,131,500

Cash Dividend                       -$36,900

Stock Dividend                -$11,388,000

Dec. 31, Balance             $23,094,600

Data and Calculations:

January 1, 20Y5, Balances:

Common stock:

500,000 shares authorized shares at $20 stated value

367,000 shares issued      $7,340,000

Additional Paid-In Capital        844,100

Retained Earnings             33,388,000

Treasury Stock (22,800 shares,

at a cost of $17 per share)   -387,600

Data Analysis:

Jan. 22 Dividend Payable $30,978 (344,200 x $0.09) Cash $30,978

Apr. 10 Cash $1,775,000 Common Stock $1,420,000 Additional Paid-in Capital $355,000 issued, 71,000 shares at $25 per share

Jun. 6 Cash $615,600 Treasury Stock $387,600 Additional Paid-in Capital $228,000 Sold at $27 per share

Jul. 5 Stock Dividend $11,388,000 Dividend Distributable $11,388,000

(438,000 shares at $26)

Aug. 15 Dividend Distributable $11,388,000 Common Stock $8,760,000 Additional Paid-in Capital $2,628,000

Nov. 23 Treasury Stock $504,000 Cash $504,000 (28,000 shares at $18 per share)

Dec. 28 Dividend Expense $36,900 Dividend Payable $36,900 (410,000 shares at $0.09)

Dec. 31 Retained Earnings $1,168,400 Cash Dividend $36,900 Stock Dividend $11,388,000

Dec. 31 Income Summary $1,131,500 Retained Earnings $1,131,500

Thus, the stockholders’ equity accounts of Morrow Enterprises Inc. have been prepared as above.

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